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CREDIT  UNION  PRIMER 

by 

ARTHUR  H.  HAM 

and 

LEONARD  G.  ROBINSON 


Published  by 

Division  o:p. Remedial  Loans 

Russell  Sage  Foundation 

13d  East  22nd  Street 

New  York  City 


1914 


Price  25  Cents 


GIFT  OF 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/creditunionprimeOOhamarich 


GIFT 
NOV  19  1915 


RL14 


THE   LOAN   SHARK   CAMPAIGN 


by 


MALCOLM   W.    DAVIS 


•R-S 
•F- 


Reprinted  from  the 
New  York  Evening-  Post,  April  11,   1914 

BY  THE 

Division  of  Remedial  Loans 
Russell  Sage  Foundation 

130  East  22nd  Street,  New  York  City 


April,  1914 


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^0 


^1 


THE  LOAN  SHARK  CAMPAIGN 

CONSIDER  the  plight  of  the  man  who  needs  a  little  ready 
money  quickly.  When  you're  ''broke" — if  you  live  on 
the  East  Side — or  "embarrassed  by  a  temporary  shortage 
of  funds" — if  you  live  on  the  West — there  are  just  three  ways  in 
which,  lacking  a  bank  account  or  valuable  property,  you  can  get 
it.  You  can  go  to  a  friend  or  possibly  to  your  employer  to  borrow 
it;  you  can  go  to  a  reputable  loan  agency  and  get  the  money  on 
your  note,  secured  by  small  personal  belongings,  or  you  can  go  to 
a  "loan  shark,"  who  will  doubtless  charge  you  an  illegal  and 
usurious  rate  of  interest,  get  away  from  you  as  much  of  your 
money  as  he  can,  and,  if  you  happen  to  be  poor,  seize  your  prop- 
erty if  he  can  and  go  to  any  length  to  realize  on  an  illegal  claim. 
It  is  the  operation  of  this  last  parasitic  and  oppressive  business 
which  experts  in  the  fight  for  a  better  living  and  working  chance 
for  everybody  are  now  studying  to  destroy. 

That  there  is  a  real  necessity  for  good  loan  companies  to  exist, 
even  in  a  pretty  well  organized  society,  and  that  such  companies 
have  to  charge  a  rate  of  interest  much  in  advance  of  that  usually 
earned  by  money  loaned  for  business  enterprise,  have  been  the 
two  facts  hardest  to  teach  to  men  and  women  who  would  naturally 
be  interested  in  a  campaign  against  loan  sharks.  In  general, 
they  have  been  attempting  the  old  but  still  specious  method  of 
"legislating  people  into  righteousness,"  and  have  contented  them- 
selves with  passing  laws  prohibiting  usury.  The  impression 
seems  to  have  been  that  when  such  laws  were  passed  the  loan 
sharks  would  immediately  go  out  of  business.  What  people  are 
beginning  to  realize  is  that  bad  practices  are  rarely  stopped  merely 
by  forbidding  them.  So  long  as  people  get  into  trouble  and  have 
to  have  money  on  short  notice,  loan  agencies  will  exist;  and  in- 
stead of  lessening  the  evil,  the  stricter  the  laws  against  the  busi- 
ness are  made,  the  higher  are  the  rates  charged  on  loans,  as 
reward  for  the  risks  involved.  The  way  to  fight  the  loan  sharks, 
experts  have  found,  is  to  go  into  aggressive  competition  with 
them  by  passing  laws  which  allow  honorable  companies  to  run  a 
business  at  a  reasonable  profit.  This  has  not  the  pauperizing 
effect  of  mere  charitable  relief;  it  gives  the  borrower  an  oppor- 
tunity to  get  himself  out  of  his  difficulties  without  losing  his 
independent  self-respect.     Also,   experience  has  proved  that  it 

3 


drives  most  loan  sharlcs  ouf  of  business  and  faces  the  few  who 
survive  with  the  necessity  of  cutting  down  their  rates  to  some- 
thing like  a  reasonable  percentage. 

SPREAD   OF   REMEDIAL   LOAN    SOCIETIES. 

The  most  extensive  organization  which  is  carrying  on  this 
work  at  present  is  the  National  Federation  of  Remedial  Loan 
Associations,  with  which  the  Division  of  Remedial  Loans  of  the 
Russell  Sage  Foundation  co-operates  in  gathering  information 
and  in  publishing  bulletins  on  the  progress  and  phases  of  the  work. 
Founded  in  1909,  this  Federation  has  grown  until  it  embraces 
thirty-one  of  the  important  cities  from  the  Atlantic  to  the  Pacific 
Coast  and  has  thirty-five  companies  in  active  operation.  New 
York,  Syracuse,  Rochester,  Buffalo  and  Utica,  N.  Y.,  Boston  and 
Worcester,  Mass.,  Providence,  R.  I.,  Portland,  Me.,  Newark  and 
Paterson,  N.  J.,  Washington,  D.  C,  Baltimore,  Md.,  Louisville, 
Ky.,  Cleveland,  Cincinnati  and  Youngstown,  O.,  Indianapolis, 
Ind.,  Chicago,  111.,  St.  Louis  and  Kansas  City,  Mo.,  Detroit 
and  Grand  Rapids,  Mich.,  Minneapolis,  St.  Paul  and  Duluth, 
Minn.,  Milwaukee,  Wis.,  Sioux  City,  la.,  San  Francisco,  Cal., 
and  Seattle,  Wash.,  are  the  cities  already  officially  connected  by 
companies,  while  Dallas,  Tex.,  Portland,  Ore.,  Philadelphia,  Pa., 
Lynn,  Mass.,  and  Colorado  Springs,  Colo.,  people  are  organizing 
companies,  and  Jersey  City,  N.  J.,  Dayton,  O.,  Los  Angeles  and 
Oakland,  Cal.,  and  San  Antonio  and  Houston,  Tex.,  are  actively 
interested  and  will  undoubtedly  start  companies  soon.  These 
companies  generally  loan  small  amounts  of  money  on  mortgage 
of  personal  property  as  security,  although  a  few  also  accept 
pledges,  endorsed  notes,  or  salaries  as  a  basis.  The  rates  of 
interest  vary  from  ^  per  cent,  a  month  in  a  few  cases  to  3  per 
cent,  a  month,  with  varying  schedules  of  special  fees  for  investi- 
gation of  claims  and  registration. 

ENDING  THE  LOAN   SHARK'S   HAPPY  DAYS. 

What  these  companies  have  done  toward  putting  the  loan 
shark  out  of  business  may  be  indicated  by  the  experience  of  one 
of  them.  The  Detroit  company  started  its  work  in  1906,  after 
the  passage  of  the  Michigan  law  on  loan  agencies,  and  at  that 
time  there  were  over  twenty-five  loan-shark  companies  operating 
in  the  city.  For  a  time  no  effects  of  the  reliable  company's  ac- 
tivity were  discernible.  Then  suddenly  things  began  to  happen, 
and  within  half  a  year  company  after  company  closed  up  its 

4 


office,  until  there  was  only  one  concern  which  loaned  money  on 
salaries,  and  which  was  not  complying  with  the  law.  There 
were  two  other  companies  which  accepted  the  legal  limitations, 
but  the  rest  were  put  out  of  business  directly  through  the  efforts 
of  the  prosecuting  attorney,  whose  first  evidence  was  furnisheii 
to  him  by  the  remedial  loan  company. 

In  Cincinnati,  O.,  one  of  the  owners  of  a  loan-shark  office 
which  had  been  among  the  oldest  in  the  city,  admitted  to  the 
manager  of  the  remedial  loan  company,  after  it  had  been  in 
operation  a  few  years,  that  the  other  operators  might  as  well 
close  up  shop.  ''The  good  old  days  of  the  loan  business  are 
gone  forever,"  he  said.  "The  Citizens'  Company  has  queered 
the  business."  In  New  York  the  results  have  been  equally 
successful.  As  a  result  of  the  competition  of  the  remedial 
societies  and  an  energetic  campaign  by  District  Attorney 
Whitman,  the  advertisements  of  loan-shark  companies  have 
almost  disappeared  from  the  New  York  newspapers,  and  the 
companies  that  are  left  have  reduced  rates,  and  are  quite  will- 
ing to  accept  reasonable  settlement  of  debts.  Those  who  have 
been  in  the  fight  claim  that  the  bona-fide  loan  shark  has  almost 
disappeared  from  the  city.  Everywhere  the  testimony  has  been 
that,  in  the  face  of  honest  competition,  the  loan  sharks  either 
went  out  of  business  or  cut  down  their  rates  materially. 

ONE    VICTIM    OF    LOAN    SHARKS. 

What  was  meant  by  the  "good  old  days  of  the  loan  business" 
is  probably  fairly  well  understood  by  everybody,  and  yet  the  ex- 
tent to  which  extortion  has  been  carried  would  still  surprise 
people  who  thought  they  knew  something  of  the  trade.  Take 
the  case  of  one  individual,  a  fairly  high-salaried  clerk,  earning 
$2,400  a  year,  who  was  suddenly  called  upon  to  raise  $400  to 
prevent  his  son-in-law  from  going  to  prison.  He  had  a  large 
family  and  had  been  unable  to  save,  so  that  he  had  to  go  to 
professional  money-lenders  who  were  in  the  habit  of  advertising 
loans  at  6  per  cent,  a  year,  but  really  charged  from  100  to  as 
high  as  1,000  per  cent.  The  man  had  to  go  to  four  lenders  to 
get  so  large  an  amount. 

During  four  years  he  paid  back  more  than  $2,000  on  his 
original  loans,  and  at  the  end  of  that  time  he  still  owed,  accord- 
ing to  the  money-lenders,  $1,700.  He  had  been  compelled  to 
make  new  loans  to  pay  the  charges  on  old  ones.  He  was  paying 
half  his  salary  each  year  to  the  sharks,  and  yet  this  was  not  all 


applying  on  the  debt,  for  there  was  a  fee  each  time  his  note  was 
extended.  At  this  time,  when  he  was  fifty-five  years  old,  and 
the  state  of  his  affairs  was  breaking  down  his  health,  his  case 
came  to  the  notice  of  the  Division  of  Remedial  Loans  of  the 
Russell  Sage  Foundation,  and  its  director  took  the  matter  to 
the  man's  employer.  At  first  the  employer's  decision  was  that 
he  would  discharge  the  man,  under  his  rule  that  any  employee 
dealing  with  money-lenders  should  lose  his  place.  He  belonged 
to  the  large  class  who  thought  that  borrowing  must  always  be 
a  sign  of  unthriftiness.  He  was  brought  to  see  the  case  in 
another  light,  however,  and  in  his  final  decision  to  help  the 
man  in  a  legal  fight  to  rid  himself  of  his  creditors  he  began  the 
new  movement  among  employers  to  protect  their  men  from 
loan  sharks. 

CO-OPERATIVE  SOCIETIES  FOR  EMPLOYEES. 

In  addition  to  fostering  this  new  spirit  among  employers, 
making  them  see  that  they  were  doing  harm  by  turning  their  men 
out  into  the  streets  when  they  were  found  to  have  borrowed 
money,  without  any  investigation  of  the  reasons  for  the  borrow- 
ing, an  important  part  of  the  modern  constructive  campaign  is 
the  development  of  co-operative  loan  societies  among  employees 
themselves.  This  is  one  of  the  most  effective  ways  of  dealing 
with  the  problem  of  need  for  money  in  emergencies  on  the  part 
of  a  man  who  is  dependent  on  a  salary.  A  great  deal  of  the  ex- 
pense of  an  ordinary  commercial  company  is  avoided  in  the  em- 
ployees' associations,  for  the  men  know  each  other  and  the 
recommendation  of  a  credit  committee  is  sufficient  warrant  for 
a  loan  without  the  costly  investigation  of  personal  cases  that  a 
company  has  to  make.  The  men  themselves,  contributing  to 
the  association  and  managing  it,  feel  a  pride  in  it,  and  are  able 
to  use  it  with  dignity,  while  by  making  it  a  savings  association 
as  well,  with  an  office  in  the  company's  building  ready  at  hand 
when  the  men  draw  their  pay  envelopes,  it  can  be  made  a  power- 
ful influence  for  thrift. 

In  the  lack  of  such  an  organization  the  men  are  forced  to  turn 
to  commercial  companies  of  some  sort.  Recently  there  has 
sprung  up  a  movement  for  industrial  loan  banks  upon  a  com- 
paratively new  plan,  which  loan  money  on  endorsed  notes  and 
receive  a  percentage  of  return  which  is  low  in  comparison  to  that 
which   loan    sharks   ordinarily    demand.      In    general    they    are 

6 


unable  to  loan  money  profitably  in  amounts  smaller  than  $50, 
however,  and  consequently  they  fail  to  meet  the  needs  of  a  large 
class  of  borrowers,  for  the  average  amount  asked  for  is  much 
below  that  level.  Really  to  defeat  the  unprincipled  operators 
who  are  always  on  the  watch  to  get  a  grip  on  the  borrower  who 
needs  $10  or  $20  and  run  him  as  far  into  debt  as  they  can,  it  is 
necessary  to  have  agencies  making  equally  small  loans  at  a 
lower  cost. 

It  is  here  that  the  need  for  better  laws  on  the  business  of  loan 
agencies  appears.  There  are  eighteen  or  twenty  states  which 
have  passed  special  legislation  of  various  sorts  on  this  question, 
and  within  the  past  year  New  York  and  New  Jersey  have  passed 
full  and  significant  measures  dealing  with  the  issue.  In  New 
Jersey  a  license  is  required  and  the  business  is  under  the  super- 
vision of  the  Commissioner  of  Banking  and  Insurance.  The 
business  is  done  under  bond  to  observe  the  law,  is  subject  to 
thorough  investigation,  and  the  rate  of  interest  is  3  per  cent,  per 
month.  For  violations  a  loan  becomes  void,  and  the  borrower 
is  entitled  to  recover  all  sums  paid  upon  it.  In  New  York  the 
business  has  been  put  on  a  basis  of  2  per  cent,  interest  per  month 
on  all  loans  less  than  $200,  with  certain  special  fees,  and  has  been 
brought  under  the  Department  of  Banking.  This  bill  is  now 
waiting  for  the  Governor's  signature,  and  is  expected  to  receive 
it  shortly.*  Other  states  in  which  laws  have  been  passed  to 
make  less  broad  and  easy  the  way  of  the  loan-shark  are:  Con- 
necticut, Delaware,  Michigan,  Pennsylvania,  Tennessee,  Vir- 
ginia, Wisconsin,  California,  Ohio,  Massachusetts,  Montana, 
Maryland,  Mississippi,  Rhode  Island,  Colorado,  Oregon,  Indiana, 
Illinois,  Maine,  Minnesota,  Missouri  and  Nebraska,  while  Iowa, 
Texas,  Utah,  Oklahoma  and  Kansas  have  recently  been  pushing 
good  legislation.  The  year  1912  was  the  first  to  see  the  actual 
imprisonment  of  a  convicted  loan  shark.  Since  then  there  have 
been  many,  including  within  the  past  few  months  that  of  one 
of  the  most  notorious  and  extensive,  operators  in  the  country. 

WHY  2  PER  CENT.  A  MONTH  ? 

The  attempt  of  those  who  have  been  fighting  the  loan  sharks, 
however,  in  which  the  Division  of  Remedial  Loans  of  the  Russell 
Sage  Foundation  has  played  an  aggressive  and  leading  part 
which  has  commanded  high  praise,  has  not  been  so  much  for 
prosecution  as  for  constructive  work  on  a  competitive  system. 

♦Signed  April  16,  1914. 


They  are  trying  to  substitute  for  the  hundreds  of  per  cent, 
charged  in  interest  by  the  usurers  a  charge  of  from  2  to  3  per 
cent,  a  month.  It  is  just  at  this  point  that  the  hands  of  pubhc- 
spirited  people  are  usually  raised  in  righteous  horror.  Three 
per  cent,  a  month !  Or  even  2 !  Twenty-four  per  cent,  a  year ! 
Compared  with  ordinary  business  returns  on  invested  capital, 
which  is  the  comparison  they  instinctively  make,  this  sounds 
pretty  big.  They  forget,  however,  that  this  money  is  actually  the 
capital  and  most  of  the  equipment  and  working  force  of  the 
company  as  well.  Out  of  the  returns  on  it  must  be  paid  not 
only  a  reasonable  dividend  and  all  office  expenses,  but  also 
heavy  expenses  in  investigation  of  borrowers'  requests  as  well. 
A  great  deal  of  money  must  be  spent  in  finding  out  whether  each 
borrower  is  what  he  represents  himself  to  be  and  has  what  he 
represents  himself  to  have,  in  order  to  avoid  greater  losses 
through  bad  loans.  An  instance  will  make  the  case  clear.  The 
Provident  Loan  Society  of  New  York,  the  biggest  remedial  loan 
society  in  the  business,  with  a  capital  of  over  $7,000,000,  has 
found  that  a  loan  of  $250  repaid  in  two  weeks  at  an  interest  of  Yi 
of  1  per  cent,  for  that  period  will  just  redeem  the  cost  of  making 
the  loan  and  the  cost  of  the  capital  employed.  Fourteen  per  cent, 
of  all  the  loans  made  by  this  society  are  redeemed  within  two 
weeks.  Loans  of  less  than  $10  made  at  a  charge  of  1  per  cent, 
per  month  do  not  pay,  even  though  they  are  not  redeemed  until 
the  end  of  12  months,  so  that  in  general  all  business  in  smaller 
loans  is  done  at  an  actual  loss. 

A  study  of  the  field  has  shown  that  the  average  annual  op- 
erating expense  of  seventeen  chattel  loan  societies  was  14.4  per 
cent,  of  the  average  amount  outstanding  in  loans,  including  losses 
from  unpaid  loans.  Operating  expenses  in  individual  cases  vary 
considerably,  according  to  local  conditions.  Adding  6  per  cent, 
as  a  moderate  rate  of  return  to  the  investors  on  the  capital  in 
the  business,  there  is  a  total  of  at  least  20  per  cent,  which  must 
be  raised  on  the  money  loaned.  There  is  the  business  basis  for 
practical,  honest  rates. 

The  fight  is  proceeding  most  encouragingly  now.  The  work 
of  education  is  bringing  results,  and  loan  sharks  are  taking  fright 
in  all  parts  of  the  country.  All  that  the  sincere  workers  for 
reform  ask,  is  the  passage  of  laws  which  will  permit  them  to 
start  new  backfires  against  the  force  of  devastation  which  threat- 
ened at  one  time  most  dangerously  to  sweep  the  country. 

8 


RRANGEMENTS  have  been  made  with 
The  Clover  Press,  Grand  and  Centre^ 
Streets,  New  York  City,  to  furnish 
complete  outfits  of  the  necessary  books 
and  forms  for  Credit  Unions,  at  a 
total  cost  of  $25  per  outfit.  All 
books  and  forms  conform  to  the  suggestions  contained 
in  '*A  Credit  Union  Primer  "  published  by  the  Division 
of  Remedial  Loans  of  the  Russell  Sage  Foundation. 

The  supply,  which    is  adequate  for  a^  Credit  Union 
with  a  membership  of  100,  includes  the  following: 

100  Pass  Books  (containing  model  by-laws) 

1  112-Page  General  Ledger 
125  Individual  Ledger  Sheets 

1  Individual  Ledger  Sectional  Post  Binder 

1  Cash  Book,  200  Leaves 
125  Certificate  of  Shares  Cards 
100  Applications  for  Membership 
100  Subscriptions  for  Shares 
100  Regular  Meeting  Notices 
100  Special  Meeting  Notices 
500  Deposit  Slips 
100  Applications  for  Loan 
100  Promissory  Notes 
50  Statement  Forms 

1   Membership  Book 

1  Minute  Book 

5  1%  Interest  Tables,  printed  on  Linen  Stock 


THE    CLOVER    PRESS  is  prepared  to  furnish  outfits  for 
Credit    Unions   at  short  notice. 


A   CREDIT   UNION    PRIMER 


An  elementary  treatise  on  Cooperative  Banking,  containing 
questions  and  answers  concerning  methods  of  organization 
and  operation,  necessary  books  and  forms,  suggested  by- 
laws and  the  Credit  Union  Law  of  New  York 


by 

ARTHUR  H.  HAM 

Director,  Division  of  Remedial  Loans 

Russell  Sage  Foundation 

and 

LEONARD  G.  ROBINSON 

General  Manager,  Jewish  Agricultural  and 

Industrial  Aid  Society 


Published  by 

Division  of  Remedial  Loans 

Russell  Sage  Foundation 

130  East  22nd  Street 

New  York  City. 


Copyright,  1914,  by 
The  Russell  Sage  Foundation 


CONTENTS 


Page 
Introduction   1 

Questions  and  Answers 13 

Books  and  Forms ^28 

Organization  Certificate 35 

By-Laws   * 37 

New  York  Credit  Union  Law 68 


PREFACE 


For  a  number  of  years  the  Russell  Sage  Foundation,  through 
its  Division  of  Remedial  Loans,  has  been  working  to  make 
it  more  and  more  possible  for  people  of  small  incomes  who  find 
themselves  compelled  to  borrow  money  for  proper  purposes  to 
do  so  under  reasonable  conditions.  It  has  tried  to  put  an  end  to 
the  iniquitous  extortions  of  loan  sharks.  It  has  conducted  a 
campaign  of  exposure  through  the  public  press ;  in  various  states 
it  has  aid*ed  in  preparing  and  securing  the  enactment  and  enforce- 
ment of  laws  to  limit  strictly  the  rates  of  interest  and  charges 
that  may  be  made  on  small  loans ;  it  has  helped  in  procuring  the 
evidence  necessary  to  ensure  the  conviction  of  loan  sharks  and  to 
obtain  adequate  hearings  in  the  courts  on  disputed  questions  of 
law.  One  of  its  main  functions  has  been  to  foster  the  forma- 
tion in  cities  of  remedial  loan  associations,  whose  object  is  to 
loan  small  sums  at  as  low  rates  of  interest  and  on  as  easy  terms 
as  may  be  compatible  with  a  fair  return  on  the  capital  invested. 
But  when  the  loan  shark  is  eliminated  and  agencies  for  loaning 
money  on  fair  terms  are  established  in  all  the  cities  the  field  will 
not  be  covered.  An  independent  commercial  agency  which  works 
for  even  a  small  profit  must,  in  order  to  keep  itself  financially 
sound,  carefully  scrutinize  the  security  offered  to  it  and  the 
responsibility  of  applicants  for  loans.  The  necessary  investiga- 
tion is  costly  and  the  smaller  the  size  of  loans,  the  greater  the 
comparative  cost.  For  this  and  other  reasons  such  agencies 
must  charge  from  twice  to  four  times  the  ordinary  commercial 
rates  for  loans.  Their  relations  to  borrowers  are  also  in  the 
main  merely  commercial  and  impersonal.  Many  persons  needing 
small  loans  cannot,  therefore,  afford  to  use  them;  nor  can  they 
give  a  borrower  helpful  advice  and  supervision  as  to  spending  his 
money. 

In  Europe  and  Canada  many  associations  for  saving  and 
loaning  on  a  mutual,  cooperative  basis  have  been  established  and 
carried  on  for  many  years.  These  associations  have  been  organ- 
ized to  meet  the  needs  of  country  districts  as  well  as  of  cities. 
They  are  managed  by  officers  and  committees  selected  by  the 
members  themselves.     These  officials  usually  serve  without  pay. 


Their  members  being  on  the  same  economic  plane,  are  well  enough 
acquainted  with  each  other  to  judge  of  the  requirements  and 
responsibility  of  those  of  their  members  who  wish  loans.  They 
also  require  an  applicant  to  tell  the  use  to  which  the  money  will 
be  put  and  they  determine  whether  it  is  wise  for  him  to  borrow. 
Not  only  do  they  provide  for  their  members  a  source  of 
loans,  but  they  are  able  to  make  very  small  loans  at  a  low  rate 
of  interest  and  to  regulate  the  time  and  method  of  repayment 
according  to  the  needs  of  each  case.  On  the  other  hand,  they 
prevent  borrowing  for  unwise  purposes.  More  important  still, 
they  give  practice  in  careful  business  administration,  teach  self- 
government  on  a  democratic  basis,  and  develop  a  community 
spirit.  "Democracy  financing  itself  is  a  matter  of  financial 
moment  not  alone  for  its  first  service  but  for  the  possibility  it 
affords  to  collective  industrial  undertakings.  In  cooperative 
banking  lies  a  source  of  enrichment,  not  only  of  material  wealth 
but  of  character,  and  the  education  of  the  common  man  to  the 
management  and  investment  of  a  common  trust."* 

There  is  no  doubt  that  cooperative  associations  are  the  best 
agencies  for  dealing  with  the  problems  of  small  loans  as  well  as 
those  of  thrift.  It  is  of  real  social  importance  that  cooperative 
loan  and  saving  associations  should  be  widespread.  It  is  un- 
fortunate that  in  the  United  States  only  a  few  exist  as  yet.  A 
most  significant  move  was  made  by  Massachusetts  in  1909  when 
it  enacted  a  law  providing  for  the  organization  of  such  as- 
sociations with  legal  sanction  and  supervision  under  the  name 
of  "Credit  Unions."  This  Primer  owes  much. to  the  Massa- 
chusetts law.  It  has  been  prepared  for  the  purpose  of  encourag- 
ing the  formation  of  similar  associations  throughout  this  country 
and  elsewhere,  and  of  showing  in  detail  the  various  steps,  regula- 
tions and  forms  that  are  necessary  to  proper  and  sound  business 
management.  It  is  founded  on  the  practice  in  Massachusetts 
but  its  authors  have  made  use  of  their  own  experience  and  of  all 
the  information  that  they  could  get  from  other  sources  to  provide 
the  best  possible  model  that  can  be  devised  at  the  present  stage  of 
progress.  Their  work  has  been  most  careful,  thorough  and  com- 
prehensive. They  are  admirably  equipped  for  such  a  w^ork  by 
both  experience  and  study. 


*Capitalizing     Character     by     John     L.     Mathews.       Harper's     Monthly     Magazine. 
October,    1913. 


Ill 

Mr.  Ham,  as  Director  of  the  Division  of  Remedial  Loans 
of  the  Russell  Sage  Foundation,  has  made  a  close  study  of  small 
loan  conditions  in  cities.  His  six  years  of  work  in  this  field  for 
the  Foundation  have  brought  him  a  great  fund  of  information 
and  experience.    To  him  is  due  the  success  that  has  been  achieved. 

Mr.  Robinson  has  been  an  effective  pioneer.  As  general 
manager  of  the  Jewish  Agricultural  and  Industrial  Aid  Society 
he  has  for  ten  years  been  engaged  in  making  loans  to  farmers 
m  nearly  every  state  in  the  union.  He  has  acquired  a  wide 
knowledge  of  rural  credit  conditions  and  has  succeeded  in  in- 
troducing small  cooperative  loan  associations  in  a  number  of 
communities  of  Jewish  farmers  in  the  eastern  states. 

Together  the  authors  are  largely  responsible  for  the  passage, 
in  1913,  of  the  New  York  Credit  Union  Law.  Recognizing  the 
futility  of  a  mechanical  copying  of  cooperative  credit  systems  of 
other  countries  they  have  suggested  an  elastic  system  which  it  is 
believed  will  prove  itself  adaptable  to  varying  conditions  in  vari- 
ous parts  of  this  country.  The  Primer  will  undoubtedly  have  a 
wide  and  important  social  effect. 

The  Foundation  is  indebted  to  Mr.  Pierre  Jay,  vice-presi- 
dent of  the  Bank  of  the  Manhattan  Company  and  former  Bank 
Commissioner  of  Massachusetts;  to  M.  Alphonse  Desjardins, 
founder  of  the  Canadian  cooperative  banking-  system;  to  Mr. 
George  L  Skinner,  First  Deputy  Superintendent  of  Banks  of 
New  York,  and  to  others  who  have  given  much  valuable  advice 
in  the  preparation  of  this  Credit  Union  Primer. 

John  M.  Glenn, 
General  Director  of  Russell  Sage  Foundation. 


INTRODUCTION. 

THE  number  of  cooperative  credit  associations  or  Credit 
Unions  now  in  existence  in  all  parts  of  the  world  has 
been  estimated  to  be  more  than  65,000,  with  a  mem- 
bership approximating  15,000,000  and  an  annual  business 
amounting  to  $7,000,000,000. 

Impressive  as  these  figures  are,  they  are  less  striking  than 
the  economic  and  social  results  which  this  form  of  coopera- 
tion has  achieved  wherever  it  has  found  a  foothold.  It  has 
regenerated  and  accelerated  agriculture,  commerce  and  in- 
dustry. It  has  stamped  out  usury  and  raised  millions  of 
human  souls  from  the  depths  of  despair  to  lives  of  hopeful- 
ness and  service.  It  has  supplanted  shiftlessness  by  industry ; 
improvidence  by  thrift;  intemperance  by  sobriety;  selfishness  by 
neighborliness ;  individual  effort  by  concerted  action — in  fact, 
has  proved  to  be  one  of  the  most  potent  moral,  educational,  and 
social  forces  in  the  history  of  civilization  and  in  the  enrichment 
of  the  life  of  the  common  people. 

Credit  unionism  originated  in  Germany  in  1849.  Fred- 
erick William  Raiffeisen  and  Franz  Hermann  Schulze-Delitzsch 
were  the  founders  of  the  two  systems  of  cooperative  credit 
which  are  commonly  known  as  the  Raiffeisen  system  and  the 
Schulze-Delitzsch  system,  respectively.  All  cooperative  credit, 
wherever  found,  is  patterned  after  one  of  these  two  systems. 

The  United  States  Commission,  which  recently  made  an 
investigation  of  rural  credit  in  Europe,  reports  the  number 
of  Raiffeisen  banks  in  Germany  on  January  1,  1910,  as  14,993 
with  a  membership  of  1,447,766.  The  loans  outstanding  on  that 
date  aggregated  $452,749,961.  The  Commission  estimates  the 
total  number  of  such  banks  in  existence  to-day  in  Germany  to 
be  17,000  with  a  membership  of  1,700,000.  In  1911  the  number 
of  Schulze-Delitzsch  banks  was  1,051  with  a  membership  of 
671,589.  Their  total  loans  to  members  during  that  year  reached 
the  huge  sum  of  $1,106,165,207. 

Italy  was  the  second  country  to  adopt  the  Credit  Union. 
Ex-Premier  Luzzatti  introduced  a  modified  Schulze-Delitzsch 
system  into  Italy  in  1866  by  creating  the  People's  Banks,  while 
Dr.  Leone  Wollemborg  is  responsible  for  the  creation,  in  1883,  of 
Italian  Rural  Banks  on  the  Raiffeisen  plan.    Austria  followed  in 


1885.  Ireland,  under  the  inspiring  leadership  of  Sir  Horace 
Plunkett,  has  to-day  over  200  cooperative  banks.  Cooperative 
credit  was  introduced  into  France  in  1892.  Russia  has  its 
Credit  Unions;  so  has  India.  In  1909  Japan  had  1,886  Credit 
Unions  v^ith  a  membership  of  170,000. 

In  Canada  the  first  Credit  Union  was  founded  in  1900  by 
Alphonse  Desjardins,  in  the  town  of  Levis,  Province  of  Que- 
bec. Through  his  enthusiasm,  energy  and  self-sacrifice,  over 
150  Credit  Unions  have  been  formed  and  are  in  successful 
operation  in  the  Canadian  Provinces.*  Credit  Unions  of  various 
types  are  also  known  to  exist  in  many  of  the  countries  of 
South  America. 

The  wedge  of  credit  unionism  was  driven  into  the  United 
States  by  the  enactment  of  the  Massachusetts  Credit  Union 
Law  in  1909.  Since  then  legislation  has  been  enacted  in  New 
York,  Wisconsin  and  Texas.  The  Bank  Commissioner  of 
Massachusetts  reported  in  1913  the  existence  of  34  Credit 
Unions  in  urban  communities  in  that  state  with  a  membership 
of  4,529  and  a  share  capital  of  $120,284.48.  They  loaned  to  their 
members  during  that  year  a  total  of  $146,740.53. 

The  first  Credit  Union  to  organize  under  the  New  York 
law  was  the  Speedwell  Credit  Union  formed  by  the  employes 
of  the  real  estate  firm  of  Bing  &  Bing,  in  New  York  City. 
This  Union,  formed  in  January  1914,  has  already  obtained  a 
membership  of  nearly  200  and  has  accumulated  assets  of 
$15,000. 

The  first,  and  so  far  the  only,  Credit  Unions  to  be  formed 
am.ong  farmers  in  the  United  States  were  those  organized  by  the 
""ewish  Agricultural  and  Industrial  Aid  Society  of  New  York, 
^^nder  the  spur  of  necessity  and  without  waiting  for  legislative 
or  other  aid,  that  Society  has  organized  18  Credit  Unions 
since  1911 — eight  in  New  York,  five  in  New  Jersey,  four  in  Con- 
necticut, and  one  in  Massachusetts.  On  September  30,  1913, 
they  reported  a  membership  of  547  and  a  total  capital  of  $9,665. 
They  had  then  been  in  operation  for  periods  averaging  about  13 
n^nni-hs.  during  vv^hich  time  they  loaned  to  their  members 
$73,624.66,  or  eight  times  their  capital.     Although  they  charge 


*A  detailed  account  of  the  operations  of  the  Canadian  Credit  Unions  will  be 
found  in  The  Cooperative  People's  Bank  by  M.  Alphonse  Desjardins,  N.  Y. 
Russell    Sage    Foundation,    Division    of    Remedial    Loans,     1914. 


only  six  per  cent,  annual  interest  upon  loans  tlieir  net  profits 
up  to  that  time  aggregated  $1,317.93  or  at  the  rate  of  13>^ 
per  cent,  per  annum  on  their  capital. 

However  valuable  the  record  of  these  Credit  Unions  may 
be  as  showing  the  possibilities  of  credit  unionism  in  urban 
and  rural  communities  and  their  adaptability  to  American 
conditions,  it  must  be  confessed  that  the  figures  taken  by  them- 
selves look  pitifully  small  and  insignificant  when  compared  with 
those  of  other  countries. 

Under  present  conditions  in  many  parts  of  the  United 
States  if  the  farmer  needs  new  machinery,  live  stock,  draft 
animals  or  supplies  to  enable  him  to  live  until  the  time  of  re- 
turns from  the  harvest,  he  must  buy  upon  credit  at  the  deal- 
ers' prices  or  mortgage  his  farm.  The  absence  of  adequate 
credit  facilities  in  some  sections  is  one  of  the  greatest  draw- 
backs to  the  development  of  the  land. 

The  need  of  better  credit  facilities  for  the  small  tradesman 
to  enable  him  to  conduct  his  business  more  efficiently  and 
for  the  wage-earner  when  he  meets  reverses,  sickness  or  other 
urgent  need,  is  fully  demonstrated  by  the  pernicious  activity 
of  the  loan  shark.  One  has  only  to  glance  at  the  records 
of  small  loan  agencies  to  be  convinced  that  by  far  the  greater 
part  of  loans  made,  while  they  may  be  the  indirect  result  of 
improvidence,  are  due  to  wants  that  are  real  and  pressing. 
Not  only  is  small  borrowing  often  a  legitimate  and  de- 
fensible procedure  occasioned  by  emergency  needs  that  lay  a 
heavy  hand  upon  the  wage-earner  but  it  frequently  is  a  pru- 
dent act  committed  in  the  spirit  of  economy.  It  enables  a  man 
to  buy  in  large  rather  than  small  quantities  or  for  cash 
instead  of  upon  the  credit  plan,  which  allows  the  instalment 
agency  to  reap  an  unconscionable  profit  at  his  expense.  With 
the  marked  progress  made  by  credit  unionism  abroad  before  it 
the  United  States  is  just  beginning  to  grasp  the  significance  of 
this  world  movement  while  its  agriculture  suffers  from  the  lack 
of  adequate  credit  facilities,  and  the  usurer  grows  rich  in  its 
cities. 

Is  it  not  remarkable  that  while  we  have  given  to  the  world 
an  object  lesson  in  political,  civic  and  religious  cooperation, 
we  should  have  to  look  to  other  countries  for  inspiration  and 
guidance  in  economic  cooperation?     Not  that  we  are  destitute 


of  economic  cooperation — many  cooperative  enterprises  both 
urban  and  rural  have  been  launched  in  this  country  w^ith  a 
fair  measure  of  success.  True,  their  death  rate  has  been  high, 
but  the  student  of  European  cooperation  knows  that  even  there 
failures  have  been  numerous. 

Has  the  adoption  of  the  Credit  Union  by  this  country 
been  delayed  because  its  functions  are  already  performed  by 
other  institutions?  If  so,  an  attempt  to  add  it  to  our  complex 
financial  machinery  would  be  worse  than  useless.  What  are  the 
agencies  now  in  existence  which  make  small  loans  and  encourage 
savings,  and  how  well  do  they  fill  the  place  of  the  Credit  Union? 

The  great  contribution  of  the  United  States  to  cooperative 
credit  is  the  building  and  loan  association.  In  August,  1913, 
there  were  over  6,200  local  building  and  loan  associations 
with  a  total  membership  of  more  than  2,500,000.  Philadelphia 
alone  has  1,000  associations  with  a  membership  of  475,000  and 
assets  of  over  $200,000,000,  making  loans  of  $500,000  each 
week.  The  remarkable  growth  and  phenomenal  success  of 
these  institutions  are  the  object  of  envy  of  European  co- 
operators.  In  providing  opportunity  for  home  building  they 
are  performing  a  function  of  prime  importance,  but  they  do 
not  supply  that  urgent,  short-term  personal  credit  which  means 
so  much  to  the  man  in  need;  and  they  cannot  enter  this  field 
for  their  loans  must  be  secured  by  real  estate  mortgage  or 
shares,  the  paid-up  value  of  which  exceeds  the  amount  of  the 
loan. 

The  remedial  loan  associations,  which  have  come  into 
existence  during  the  last  few  years,  furnish  a  satisfactory  source 
of  credit  for  the  man  who  has  personal  property  to  pledge  or 
mortgage.  There  are  now  36  in  the  United  States  with 
a  combined  capital  of  over  $12,000,000,  and  their  number  is 
rapidly  increasing.  They  are  usually  joint  stock  companies  formed 
not  primarily  for  gain  but  to  provide  small  loans  to  deserving 
borrowers  at  rates  sufficient  to  pay  the  operating  cost  and  a 
limited  return  upon  the  invested  capital.*    They  can  justly  lay 


*A  unique  form  of  organization  is  that  of  the  Provident  Loan  Society  of 
New  York,  the  largest  remedial  loan  agency  in  the  United  States.  The  Society 
was  formed  in  1894,  as  the  result  of  efforts  initiated  by  the  Charity  Organization 
Society  of  New  York,  to  do  a  general  pawnbroking  business.  It  was  incorporated 
under  special  act  of  the  legislature  as  a  membership  corporation.  Its  capital,  which 
now  amounts  to  $8,000,000,  consists  of  $2,000,000,  4^%  gold  bonds  and 
$6,000,000,  certificates  of  contribution  upon  which  interest  not  exceeding  6%  per 
annum    is    paid.      Membership   in    the    corporation    is   limited    to    100.      The    Society's 


claim  to  considerable  educational  work  and  many  of  their  bor- 
rowers are  benefited  morally  as  well  as  materially  by  contact 
with  them.  They  are  doing  a  meritorious  work  and  by  their 
competition  are  rapidly  forcing  the  loan  sharks  in  many  cities 
to  reduce  their  rates  or  discontinue  operations,  but  on  ac- 
count of  their  business-like  requirements  their  field  is  nec- 
essarily limited.  They  cannot  loan  to  the  man  who  does  not 
possess  the  required  security  and  because  of  their  impersonal 
character  they  cannot  effectively  attempt  to  encourage  bor- 
rowers to  become  thrifty  in  order  to  provide  in  advance  for 
the  emergencies  which  led  to  their  distress. 

For  most  people  a  savings  bank  account  is  the  first  step 
in  accumulation.  The  present  amount  of  deposits  in  savings 
banks,  savings  departments  of  national  and  state  banks  and 
trust  companies,  and  postal  savings  banks  cannot  be  less  than 
$7,000,000,000.  Two  and  a  half  billion  dollars  is  held  by  the 
mutual  savings  banks  of  New  York,  Massachusetts  and  Con- 
necticut alone.  That  the  savings  banks  have  played  an  important 
part  in  promoting  thrift  is  beyond  question  and  their  appeal 
has  been  considerably  strengthened  in  the  last  year  or  two  by  the 
introduction  of  the  "Christmas  club"  or  "thrift  club"  plan  under 
which  regular  weekly  deposits,  beginning  with  a  few  cents  and  in- 
creasing throughout  the  year,  are  accepted.  At  the  end  of  the 
year  the  accumulated  sum  is  returned  to  the  depositor  with  small 
interest  and  may  be  deposited  by  him  in  a  regular  savings  ac- 
count. The  plan  was  employed  last  year  by  1,000  banks,  mostly 
in  towns  and  small  cities,  which  collected  in  this  way  over 
$40,000,000.  The  forerunner  of  the  "Christmas  Club"  was  the 
Penny  Provident  Fund,  organized  by  the  Charity  Organization 
Society  of  New  York  in  1889  to  receive  savings  of  from  one 
cent  upward.  Deposits  are  receipted  for  by  stamps  attached  to 
a  stamp  card.  No  interest  is  paid  upon  deposits,  but  when  a 
few  dollars  have  been  saved  depositors  are  invited  to  open  ac- 
counts in  a  savings  bank  where  interest  may  be  earned.  More 
than  250  branch  offices  or  stamp  stations  have  been  opened  in 

certificates  are  becoming  more  widely  held  each  year  and  are  increasingly  used 
as  investments  for  philanthropic  and  educational  institutions.  There  are  now  about 
700  holders.  Trustees  of  the  Society  receive  no  compensation  for  their  services  and 
no  certificate  holder  may  hope  to  receive  any  profit  other  than  legal  interest  upon 
his  contributions  even  in  the  event  of  dissolution,  for  surplus  profits,  which  amounted 
on  December  31,  1913,  to  $1,075,348,  exclusive  of  real  estate  costing  about  $1,250,000, 
are  an  indivisible  reserve  and  are  to  be  distributed  among  charitable  institutions 
at  the  discretion  of  the  trustees. 


New  York  and  other  cities  in  and  out  of  the  state.  By  en- 
couraging small  savings,  particularly  among  children,  the  Fund 
has  developed  into  a  thrift  agency  of  considerable  importance. 
But  in  spite  of  the  enormous  growth  of  the  fiscal  agencies  which 
aid  people  to  become  thrifty,  it  is  apparent  that  the  appeal  to 
the  thrift  instinct  has  not  yet  been  heard  by  thousands  of  people. 

Thrift  is  hardly  to  be  termed  one  of  the  cardinal  virtues 
of  the  native-born  American,  for  he  sees  his  immigrant  fellow- 
citizen  live  in  comfort  on  a  wage  that  means  deprivation  for 
him.  Many  American  wage-earners,  who  are  now  constantly 
borrowing  from  loan  sharks  at  interest  rates  running  as  high 
as  500%  per  annum,  would  if  accustomed  to  thrift  be  re- 
habilitated. Surely  the  man  who  can  pay  such  charges  out  of  in- 
come could,  if  so  inclined,  put  aside  a  regular  if  small  amount 
each  week  or  month  in  provision  for  emergencies.  Why  has  he 
not  done  so  ?  It  is  because  real  thrift  depends  upon  something  be- 
sides the  existence  of  a  safe  depository  for  surplus  funds.  In 
order  to  be  thrifty  many  a  man  requires  something  more  than 
agencies  to  receive  his  deposits  and  return  them  to  him,  when 
needed,  intact  with  interest:  he  requires  an  agency  which  will 
make  its  hours  of  business  conform  to  his  convenience,  which 
is  conveniently  located,  which  does  not  require  him  to  stand 
in  line  for  a  long  time  awaiting  his  turn  at  the  expense  of 
his  lunch  hour  and  possibly  of  some  of  his  employer's  time :  he 
requires  an  agency  to  which  he  is  not  ashamed  to  bring  a 
dollar,  fifty  cents  or  even  a  quarter;  an  agency  which  once 
he  has  associated  himself  with  it  will  constantly  remind  him 
of  his  resolution  to  save  and  which  will  reward  his  thrift  by 
extending  credit  to  him  upon  easy  terms  of  repayment  se- 
cured solely  by  his  character  and  personal  worth — credit  which 
will  enable  him  to  effect  economies  in  purchasing  and  em- 
bark in  productive  enterprises,  and  will  protect  him  from  the 
usurer. 

This  is  the  field  of  the  Credit  Union.  By  its  proximity 
and  convenience  it  persuades  the  man  who  has  not  been  reached 
by  the  savings  bank  to  become  thrifty,  and  this  without  in- 
terfering with  the  growth  of  ordinary  banking  institutions — 
instead  it  actually  increases  the  field  of  the  banks.  It  makes 
the  accumulated  capital  available  to  the  persons  who  assisted 
in  its  accumulation.     It  does  not  become  a  substitute  for  the 


building  and  loan  association  or  the  remedial  loan  society; 
instead  it  becomes  a  complement  of  these  agencies,  for  the 
basis  of  the  security  for  its  loans  is  not  collateral  but  character. 

Character  is  a  recognized  form  of  security.  Most 
borrowers  possess  such  security  and  are  entitled  to  credit  upon 
this  basis,  but  to  ascertain  the  credit  to  which  they  are  en- 
titled requires  a  more  or  less  intimate  knowledge  of  their 
personal  habits  and  of  their  financial  and  domestic  situation. 
The  customer  of  the  commercial  bank  who  desires  a  loan  must 
furnish  a  statement  of  his  assets  and  liabilities  and  information 
upon  the  following  points :  annual  business  done  and  profits  made ; 
relation  of  rent,  salaries  and  overhead  charges  to  gross  profit; 
why  the  loan  is  desired ;  whether  previous  loans  have  been  obtained 
and  why;  and  the  number,  kinds,  and  wages  of  employes.  This 
information  is  supplemented  by  inquiries,  through  credit  reporting 
agencies  and  the  bank's  own  investigators,  into  the  personal  habits 
of  the  prospective  borrower,  his  mode  of  living,  his  position  in  the 
community,  the  appearance  of  his  place  of  business,  the  service 
which  he  renders  his  customers,  the  amount  of  advertising  which 
he  does,  the  manner  in  which  he  settles  his  accounts,  his  reputa- 
tion in  the  market  from  which  he  secures  goods  and  supplies,  the 
amount  of  his  debts  and  of  his  quick  assets. 

Similarly,  an  intimate  knowledge  of  the  personal  char- 
acter and  responsibility  of  the  borrower  of  $25  or  $50  must 
be  obtained  before  a  loan  can  safely  be  made  to  him.  Such 
knowledge  can  be  obtained  by  a  commercial  lending  agency  in 
a  large  city  only  at  an  expense  which  is  prohibitive  when  either 
legal  restrictions  or  the  value  of  the  money  to  the  borrower  are 
considered.  Consequently  such  agencies  making  small  loans  of 
necessity  require  collateral  security  and,  regardless  of  the  need 
and  apparent  honesty  of  the  applicant,  cannot  safely  loan  to  him 
unless  he  can  furnish  personal  property  or  other  security  in  pledge 
or  mortgage. 

Credit  Unions  are  formed  on  the  principle  that  a  man's 
best  asset  is  his  own  associates'  estimate  of  him.  Their 
advantage  is  obvious.  They  are  composed  of  a  small  homo- 
geneous membership,  mutually  acquainted.  Only  those  known 
to  be  honest  and  industrious  are  admitted  to  membership 
and  loans  are  made  only  to  such  members  as  have  a  legitimate 
need  for  the  money.     The  loan  is  further  safeguarded,  if  of  a 


8 

considerable  size,  by  the  endorsement  of  one  or  more  feliow- 
members.  Thus  the  cost  of  investigation  to  which  the  com- 
mercial lending  agency  is  committed  is  largely  eliminated  and  the 
abundance  of  security  supplied  is  sufficient  to  attract  savings 
deposits  from  members  and  enable  the  Credit  Union  to  borrow- 
when  necessary  on  favorable  terms  from  outside  sources  of 
capital.  Cooperation  therefore  brings  credit  facilities  within  the 
reach  of  those  who  individually  could  not  obtain  them.  Losses 
are  reduced  to  a  minimum,  because  each  member  is  interested 
in  every  loan  and  the  danger  of  a  member  defaulting  or 
neglecting  his  obligations  is  decreased,  not  only  because  he  is 
under  the  surveillance  of  other  members,  but  because  he  knows 
that  his  fellow  members  would  suffer.  He  is  therefore  not  so 
likely  to  default  in  his  payments  as  if  he  were  dealing  with  an 
impersonal  corporation  or  a  philanthropic  institution.  As 
directors  and  committee  members  serve  without  compensation, 
the  operating  costs  are  confined  to  the  cost  of  books  and  stationery, 
with  sometimes,  in  the  case  of  large  Credit  Unions,  an  honorarium 
to  the  person  in  active  charge  of  the  business. 

The  Credit  Union  is  the  simplest  form  of  cooperation 
and  its  operations  are  less  intricate  than  the  daily  activities 
of  the  average  farmer  or  housewife.  Its  success  depends  not 
so  much  upon  the  business  ability  and  acumen  of  its  members  as 
upon  their  honesty  and  thrift,  their  willingness  to  assume  per- 
sonal responsibility  for  and  to  act  in  sympathetic  association 
with  their  fellows. 

In  details  Credit  Unions  differ  somewhat  in  the  various 
coimtries  in  which  they  have  been  formed.  The  Raiffeisen 
association  places  no  importance  upon  share  capital  and  obtains 
its  funds  by  deposits  and  loans  from  outside  sources  through 
the  unlimited  liability  of  members.  Wherever  the  law  requires 
the  issuance  of  shares  they  are  of  nominal  value.  After  the 
usual  dividends  are  paid  from  such  profits  as  accumulate,  the  bal- 
ance is  turned  into  an  indivisible  reserve  fund.  The  purpose 
of  the  Raiffeisen  association  is  to  obtain  loanable  funds  from 
any  source  for  the  aid  of  its  members  and  members  join  for  the 
sole  purpose  of  obtaining  credit. 

The  Schulze-Delitzsch  organization  aims  chiefly  to  stimulate 
thrift  among  its  members.    At  first  associations  of  this  type  were 


formed  upon  the  basis  of  unlimited  liability,  but  many  have  since 
departed  from  that  practice.  A  large  proportion  of  their  funds 
consists  of  withdrawable  shares  which  have  a  much  higher  value 
than  in  other  types  (minimum,  $30).  Dividends  are  paid  upon 
shares  and  in  most  instances  the  management  is  in  the  hands 
of  paid  officers.  Like  the  Raiffeisen  association  deposits  are 
accepted  from  non-members. 

The  Luzzatti  banks  of  Italy  issue  instalment  shares  of 
small  value,  the  liability  of  each  member  being  limited  as  a  rule 
to  a  few  times  his  holdings.  As  in  Germany,  the  cooperative 
banks  of  Italy  receive  deposits  from  all  who  come.  The  Raiflfeisen 
associations  are  more  or  less  assisted  by  the  government  but  the 
Italian  banks  are  independent  of  government  aid. 

The  Canadian  cooperative  banks  more  nearly  resemble  the 
Italian  type  than  the  German  types.  The  moderate-priced  share 
with  limited  liability  is  used  effectively  in  securing  funds.  Shares 
are  payable  in  instalments  and  dividends  are  paid  annually. 
Strong  indivisible  reserves  are  accumulated  which,  upon  dissolu- 
tion, are  to  be  devoted  to  some  work  of  public  utility.  Unlike 
the  Italian  and  German  banks  the  Canadian  associations  deal 
only  with  members.  Their  founder  believes  that  no  government 
aid  should  be  accepted  except  in  the  nature  of  liberal  laws.  Ex- 
penses of  operation  are  small  as  the  manager  alone  receives 
compensation.  Committee  members  who  have  charge  of  loans 
may  not  borrow.  The  tendency  to  allow  undeserved  credit  to 
officers  in  European  associations  led  the  Canadian  banks  to 
prohibit  the  practice  entirely.  The  Quebec  statute  (the  only  law 
authorizing  cooperative  credit  associations  in  Canada)  insists 
upon  local  control,  permitting  no  branch  system  or  centralization, 
which  is  a  distinctive  feature  of  the  movement  in  Europe. 

The  type  of  Credit  Union  herein  proposed  resembles  the 
Canadian  type  in  many  particulars.  Deposits  are  accepted  from 
and  loans  made  to  members  only.  The  shares  are  withdrawable, 
of  small  value,  payable  in  instalments  and  are  to  receive 
dividends.  A  reserve  is  to  be  built  up  from  profits,  fees  and  fines. 
Liability  of  members  is  limited  to  the  amount  of  shares  which 
they  own  or  to  which  they  have  subscribed.  LInlike  the  Canadian 
associations  however  they  may  make  loans  to  officers  and  com- 
mittee members  upon  the  approval  of  a  majority  of  all  the  mem- 


10 

bers  and  the  reserve  fund  may,  in  the  case  of  dissolution  of  the 
Credit  Union,  be  divided  among  its  members.  Volunteer  serv- 
ice is  to  be  relied  upon  for  the  conduct  of  affairs  except  in  the 
case  of  large  Credit  Unions  where  a  nominal  compensation  is 
recommended  for  the  treasurer  or  other  executive  officer. 

The  observer  of  the  wonders  that  have  been  wrought  by 
Credit  Unions  among  farmers  and  wage-earners  abroad  should 
not  fall  into  the  error  of  believing  that  it  is  cheap  credit  alone 
that  is  responsible.  An  essential  condition  of  any  system  of 
credit  for  any  class  is  fair  and  adequate  responsibility  and 
the  important  thing  about  the  Credit  Union  is  that  it  is  con- 
trolled and  operated  by  the  members  in  their  own  interests, 
that  it  deals  only  with  its  members  and  each  is  responsible  for 
its  success  or  failure.  It  is  important  that  small  borrowers 
should  be  able  to  obtain  loans  without  undue  difficulty  and  at 
a  low  interest  rate,  but  this  does  not  justify  the  suggestion  of 
governmental  loans  in  this  field  which  would  substitute 
paternalism  for  initiative  and  self-help. 

The  Credit  Union  not  only  inculcates  and  stimulates  the 
habit  of  making  small  savings  and  renders  the  capital  thus 
accumulated  available  to  those  who  assisted  in  its  accumulation 
but,  to  quote  M.  Desjardins :  "It  teaches  its  members  how  capital 
is  managed,  safeguarded  and  multiplied  by  useful  employment ;  it 
teaches  business  methods,  self-government  and  self-reliance  and 
thereby  makes  its  members  better  citizens;  it  transforms  moral 
qualities  into  valuable  assets  and  brings  to  the  industrious  and 
thrifty  man  a  higher  reward  than  wages — the  confidence  of 
his  fellow-citizens." 

Surely  there  is  room  in  this  country  for  such  a  beneficent 
agency.  It  is  frequently  said  that  the  United  States  offers  an 
unfavorable  field  for  the  Credit  Union  for  the  reason  that 
Americans  are  strongly  individualistic  and  incapable  of 
cooperative  endeavor  and  also  because  of  the  instability  of  their 
occupations  and  residence.  But  no  country  has  ever  wanted  it  at 
first  or  felt  that  its  own  peculiar  conditions  furnished  a  favorable 
field.  Fixity  of  population  is  desirable  for  the  formation  and  suc- 
cessful operation  of  Credit  Unions  and  there  is  reason  for  believ- 
ing that  a  large  part  of  our  population  has  the  fixity  necessary  for 
such  purposes.  The  brief  experience  already  gained  in  the  United 


11 

States  indicates  that  the  desired  elements  are  to  be  found  in 
agricultural  districts;  in  labor,  religious  and  fraternal  organiza- 
tions; and  in  industrial  and  mercantile  establishments.* 

Though  Credit  Unions  should  stand  upon  their  own  feet  and 
receive  no  benevolent  assistance  from  governmental  or  other 
sources,  it  is  important  that  the  state  should  protect  them  by 
enacting  constructive  laws  requiring  them  to  organize  under  the 
supervision  of  a  competent  authority  and  to  operate  in  accordance 
with  principles  that  have  proven  to  be  safe  and  wise. 

The  employer  who  realizes  the  evil  effects  of  the  loan 
shark  system,  which  saps  the  moral  fibre  of  his  men,  may  assist 
by  ceasing  to  discharge  men  who  have  borrowed  money  upon 
their  wages.  Such  a  custom  accomplishes  nothing  except  to 
make  employes  preferred  risks  for  the  loan  shark,  for  it  gives 
him  an  additional  hold  upon  them.  The  employer  should  en- 
courage his  employes  to  form  Credit  Unions  which,  owned  and 
managed  entirely  by  themselves,  will  cultivate  self-respect  and 
knowledge  of  business  methods  and  will  become  powerful 
agencies  for  thrift  and  efficiency. 

The  questions  and  answers,  instructions,  by-laws,  forms 
and  records  which  follow  are  intended  to  serve  as  a  guide  to 
persons  who  desire  to  form  Credit  Unions.  There  is  no  reason 
why  the  plan  suggested  should  be  adopted  in  detail  if  peculiar 
circumstances  suggest  modifications,  for  the  Credit  Union  has 
a  wide  range  of  adaptability.  The  type  is  not  of  great  im- 
portance provided  the  fundamental  cooperative  principles  are 
adhered  to. 


*In  addition  to  the  Credit  Unions  already  in  successful  operation  here,  there 
have  been  formed  among  the  employes  of  many  large  corporations  in  recent  years 
associations  of  various  types  designed  to  encourage  thrift  and  extend  credit  based 
largely  upon  character.  Though  there  are  among  many  of  these  agencies  varying 
degrees  of  difference  from  the  fundamentals  of  the  Credit  Union  in  respect  ^  to 
democracy  of  administration  and  equality  as  to  profits,  they  afford  convincing 
evidence  of  the  availability  of  the  field  for  the  Credit  Union.  Among  the  most 
successful  of  these  agencies  and  those  most  nearly  resembling  the  Credit  Union  are 
the  Savings  and  Loan  Association  of  the  Celluloid  Co.,  Newark,  N.  J.,  and  the 
Deposit  and  Loan  Bureau  of  William  Filene  Sons'  Co.,  Boston,  Mass.  Another 
successful  agency  is  the  Mutual  Investment  Association  of  the  Postal  Telegraph 
Company. 

For  a  detailed  account  of  the  operations  of  these  and  similar  agencies,  see 
"Remedial  Loans — A  Constructive  Program"  (By  Division  of  Remedial  Loans, 
Russell  Sage  Foundation,  January,  1912),  and  Marcosson,  I.  F.,  "The  Wage 
Earner  as  an  Investor"   (In  Saturday  Evening  Post,  pp.  10-12,  33-34,  April  25,  1914). 


13 


QUESTIONS  AND  ANSWERS. 

What  is  a  Credit  Union? 

A  Credit  Union  is  a  cooperative  association  whose  objects 


are 


1.  To  promote  thrift  among  its  members. 

2.  To  provide  its  members  with  credit  facilities. 

What  are  the  functions  of  a  Credit  Union? 

1.  It  encourages  thrift  by  providing  a  safe,  convenient 
and  attractive  medium  for  the  investment  of  the  savings  of 
its  members  through  the  purchase  of  shares  and  the  making 
of  savings  deposits. 

2.  It  promotes  industry  by  enabling  its  members  to  bor- 
row for  productive  and  other  beneficial  purposes. 

3.  It  eliminates  usury  by  providing  its  members,  when 
in  urgent  need,  with  a  source  of  credit  at  reasonable  cost,  which 
they  could  not  otherwise  obtain. 

4.  It  trains  its  members  in  business  methods  and  self- 
government,  endows  them  with  a  sense  of  social  responsibility, 
and  educates  them  to  a  full  realization  of  the  value  of  co- 
operation. 

What  are  the  basic  principles  of  cooperative  credit  or  credit 
unionism? 

The  principles  of  credit  unionism  are: 

1.  Equality.  All  members  share  equally  in  privileges 
and  ratably  in  profits. 

2.  Democracy.  The  one-man-one-vote  principle  is  funda- 
mental. Each  member  has  but  one  vote  irrespective  of  the 
number  of  shares  he  may  hold.  ^    oi{cff^{  * 

IvKere  and  by  whom  may  a  Credit  Union  be  organised? 

Any  number  of  persons  may  combine  to  organize  a 
Credit  Union,  in  a  city,  town  or  rural  community.  In  states 
that  have  Credit  Union  legislation  a  certain  number  of  the 
incorporators  must  be  citizens  of  the  United  States  and  of  the 
state.  Where  a  Credit  Union  is  organized  as  an  unincorporated 
or  voluntary  association  this  is  not  necessary. 


14 

What  must  be  the  basis  of  membership  in  a  Credit  Union? 

The  basis  of  membership  in  a  Credit  Union  must  be  some 
common  bond  or  community  of  interest.  This  may  take  a 
number  of  forms.  It  may  be  a  neighborhood.  It  may  be 
common  occupation,  employment  by  the  same  establishment  or 
membership  in  the  same  church,  club,  lodge,  labor  union  or  other 
organization.  In  rural  communities  the  church,  parish,  school 
district  or  local  grange  furnish  a  satisfactory  foundation  for 
membership. 

What  should  bJ  the  qualifications  for  membership?  ^lACf'-^ 
,t.  Identification  with  the  basic  unit  upon  which  the  Credit 
Union  is  founded — the  church,  the  club,  the  business  establish- 
ment, etc. 

2.  Good  moral  character  and  a  reputation  for  honesty, 
sobriety  and  industry. 

Should  membership  be  limited? 

Any  limitation  of  membership  within  the  group  adopted  as 
the  basic  unit  is  wrong  in  principle.  It  creates  close  corporations 
and  cliques.  It  violates  the  cardinal  rules  of  cooperation  and 
credit  unionism. 

Is  the  large  or  the  small  Credit  Union  to  be  preferred? 
/  The  small  Credit  Union  has  many  advantages  over  the 
'  large.  One  advantage  lies  in  the  intimacy  among  members  which 
enables  them  to  know  one  another's  character,  reputation  and 
needs,  and  tends  to  increase  the  safety  of  the  loans.  Another 
advantage  is  the  encouragement  given  each  member  to  take  an 
active  interest  in  the  management  of  the  Credit  Union. 

How  may  a  small  Credit  Union  be  organized  within  a  large 
group? 

Large  numbers  of  men  employed  in  one  establishment  or 
organization  are  usually  divided  into  departmental  or  divisional 
groups.  These  groups  may  be  taken  as  the  basic  units  for  the 
organization  of  Credit  Unions.  This  is  true  of  department  stores, 
railroads  and  most  establishments  in  which  large  numbers  are 
employed.  These  groups  may  be  federated  to  good  advantage, 
but  the  individual  Credit  Union  should  not  be  so  large  as  to 
become  unwieldy.    The  smallest  workable  unit  is  about  25. 


15 

What  constitutes  the  capital  of  a  Credit  Union? 
The  capital  of  a  Credit  Union  consists  of  the  funds  paid 
in  upon  shares  by  members  and  unpaid  dividends  credited  thereon. 

Should  the  issue  of  shares  be  limited? 

There  should  be  no  limit  to  the  issuance  of  shares  by  a 
Credit  Union  in  order  that  new  members  may  be  admitted  at 
any  time  and  that  old  members  may  have  an  opportunity  to 
buy  additional  shares. 

Should  the  number  of  shares  that  may  he  held  by  one  mem- 
ber he  limited? 

As  each  member  has  but  one  vote  no  member  or  minority 
group  of  members  can  control  the  Credit  Union,  but  it  is  possible 
for  one  or  more  members,  if  allowed  to  hold  a  large  proportion 
of  the  shares,  to  influence  unduly  the  policies  of  the  Union.  For 
this  reason  it  may  be  wise  to  place  a  reasonable  limitation  upon 
the  number  of  shares  that  each  member  may  hold. 

What  should  he  the  par  value  of  a  share? 

It  is  desirable  to  fix  a  low  par  value  of  shares  so  that 
no  eligible  person  shall  be  deprived  of  membership  and  that  no 
member  shall  be  deprived  of  the  full  privileges  of  membership. 
A  par  value  of  $5  is  recommended.  Members  should  be  en- 
couraged to  purchase  from  time  to  time  as  many  shares  as  they 
can  afford. 

Should  shares  he  issued  on  the  instalment  plan? 

It  is  important  to  provide  for  payments  on  account  of  shares 
in  weekly  or  monthly  instalments,  especially  if  the  par  value 
of  the  shares  exceeds  $5. 

Should  an  entrance  fee  he  charged? 

It  is  advisable  to  charge  an  entrance  fee : 

1.  In  order  to  defray  the  organization  expenses  of  the 
Credit  Union  without  impairing  its  capital. 

2.  In  order  to  enable  the  Credit  Union  the  more  readily 
to  accumulate  a  substantial  reserve  fund. 

3.  In  order  to  make  provision  for  the  admission  of  new 
members  upon  an  equitable  basis  when  the  book  value  of  shares 
is  in  excess  of  their  par  value. 


16 

What  should  be  the  amount  of  the  entrance  fee? 

The  entrance  fee  should  be  nominal.  A  minimum  of  $0.10 
a  share  is  recommended  on  the  basis  of  a  par  value  of  $5.  This 
fee  may  be  variable  and  should  be  determined  annually. 

Should  shares  he  transferable? 

Preferably,  shares  should  not  he  transferable.  But  if  the 
Credit  Union  so  chooses,  shares  may  be  transferred  from  one 
member  to  another,  upon  the  payment  of  a  transfer  fee  which 
should  be  fixed  in  the  By-Laws.  It  is  advisable  to  create  such 
restrictions  as  will  discourage  frequent  transfers. 

Should  shares  be  withdrawable? 

Since  shares  cannot  be  transferred,  except  to  members,  and 
then  only  under  certain  restrictions,  they  should  be  made  with- 
drawable at  any  time  under  the  following  conditions: 

1.  Thirty  days'  written  notice  of  intention  to  withdraw. 

2.  Withdrawals  to  be  paid  in  the  order  of  their  filing  and 
as  funds  therefor  become  available. 

3.  A  member  who  has  filed  notice  of  his  intention  to  with- 
draw to  exercise  no  privileges  of  membership,  although  his  shares 
continue  to  participate  in  profits  until  redeemed. 

4.  A  withdrawing  member  should  be  entitled  to  the  book 
value  of  his  shares. 

What  funds  in  addition  to  its  capital  may  a  Credit  Union 
have? 

In  addition  to  the  funds  realized  from  the  sale  of  shares  to 
its  members,  a  Credit  Union  may  also  accept  the  savings  de- 
posits of  its  members  and  may  borrow  from  members  and  others. 

Why  should  deposits  he  accepted? 
The  reasons  for  accepting  deposits  are : 

1.  To  provide  members  with  a  mediimi  for  saving  on  a 
preferred  and  therefore  a  safer  basis  than  shares  and  on  a 
slightly  more  remunerative  basis  than  deposits  in  ordinary  sav- 
ings banks.  Shares  represent  periodic  savings  for  distant  ex- 
penditures; deposits  are  regular  or  irregular  savings  for  more 
immediate  needs. 

2.  To  provide  additional  funds  in  order  that  more  liberal 
credit  facilities  may  be  extended  to  members. 


17 

What  rate  of  interest  should  be  paid  on  deposits? 

The  rate  of  interest  paid  on  deposits  may  be  variable  and 
should  be  fixed  at  regular  intervals.  It  should  not,  however, 
exceed  by  more  than  one  per  cent,  per  annum,  the  rate  paid 
by  the  savings  bank  in  the  vicinity.*  Deposits  should  draw  in- 
terest from  the  beginning  of  each  calendar  month,  but  interest 
should  be  paid  quarterly. 

When  should  a  Credit  Union  horrozv? 

The  reason  for  borrowing  by  a  Credit  Union  is  to  enable 
it  to  meet  the  credit  demands  of  its  members.  Borrowing  is  an 
emergency  measure  and  should  be  employed  only  when  absolutely 
necessary.  Where  Credit  Union  legislation  exists,  the  borrowing 
power  is  regulated  by  law,  but  the  conditions  under  which  a 
Credit  Union  may  borrow  should  always  be  set  forth  explicitly 
in  the  By-Laws.  It  is  best  to  leave  all  borrowing  to  the  decision 
of  the  members  at  a  general  meeting  who  should  authorize  each 
loan  before  it  is  made. 

How  should  the  funds  of  a  Credit  Union  he  employed? 

Except  for  the  Guaranty  Fund,  which  the  law  may  require 
to  be  invested  in  a  particular  manner,  the  funds  of  a  Credit 
Union  are  primarily  to  be  used  for  the  purpose  of  making  loans 
to  members.  Surplus  ftmds  should  be  deposited  in  banks  or  in- 
vested in  prime  securities.^^^ 

Who  may  borrow? 
/All  members  in  good  standing,  with  the  exception  of  the 
Board  of  Directors,  Officers,  and  members  of  the  Credit  Com- 
mittee and  Supervisory  Committee,  should  be  eligible  to  borrow. 
Though  members  alone  may  borrow,  the  single  share  which  a 
member  must  hold  is  of  nominal  value.  The  requirement  there- 
fore involves  no  hardship. 

Should  Directors,  Officers,  and  members  of  Committees  be 
allowed  to  borrow? 

In  Massachusetts  this  is  expressly  prohibited  by  law.  In 
New  York    it  is  permitted  under  certain  conditions.     As  a  gen- 

*It  should  be  borne  in  mind  that  the  depositor  is  also  a  shareholder  and,  as 
such,  participates  in  profits  realized  by  the  Credit  Union.  After  setting  aside  a 
portion  to  the  Reserve  Fund,  profits  are  distributed  among  the  shareholders  as 
dividends. 


18 

eral  rule,  it  is  advisable  to  elect  officers  who  can  do  without 
loans,  if  the  Credit  Union  is  large  enough  to  permit  of  this  being 
done.  Otherwise,  it  is  well,  if  the  law  permits,  to  make  provision 
in  the  By-Laws  for  such  loans  to  be  made  with  the  approval  of 
the  members  at  a  general  meeting. 

For  what  purposes  should  loans  he  granted? 

Credit  may  serve  a  useful  purpose  or  it  may  do  harm.  It 
is  a  fundamental  principle  of  credit  unionism  that  loans  shall 
benefit  and  not  injure  the  borrower.  Furthermore,  a  loan 
that  is  of  no  benefit  to  the  borrower  is  likely  to  be  an 
unsafe  investment.  It  is  essential,  therefore,  that  a  Credit 
Union  should  loan  only  for  productive  purposes,  purposes 
that  will  eflFect  a  saving,  supply  an  urgent  need  or  that  will  other- 
wise prove  of  benefit  to  the  borrower ;  that  the  purpose  of  a  loan 
be  known  and  approved  before  it  is  made.  For  that  reason  ap- 
plications for  loans  should  be  made  in  writing  and  should  state 
specifically  the  purpose  for  which  the  money  is  needed. 

^ — 

Should  loans  he  limited  in  amount? 

It  is  well  to  limit  the  amount  of  the  loans  to  each  member 
for  the  sake  of  safety,  and  in  order  that  the  funds  available  for 
loans  may  be  equitably  distributed  among  members.  The  maxi- 
mum amount  of  the  loan  may  bear  some  relation  to  the  capital 
of  the  Credit  Union  or  may  be  a  fixed  sum.  There  is  no  necessity 
for  a  minimum.  On  the  contrary,  smallj  rather  than  large  loans 
should  be  encouraged. 

What  rate  of  interest  should  he  charged  on  loans? 

As  a  matter  of  principle  the  interest  charged  on  loans  should 
be  no  greater  than  is  required  to  pay  the  operating  cost,  a 
moderate  rate  of  interest  on  deposits,  to  provide  for  a  reasonable 
reserve  or  guaranty  fund,  and  to  pay  a  moderate  dividend  on 
shares.  It  is  well  to  fix  the  maximum  interest  rate  in  the  By- 
Laws.  This  rate  should  as  nearly  as  possible  approximate  the 
banking  rate  of  interest.  In  New  York  the  maximum  rate  of 
interest  that  a  Credit  Union  may  charge  is  12%  per  annum.  Care 
should  be  taken  that  the  total  charges  upon  loans  do  not  exceed 
the  maximum  allowed  by  law. 


19 

What  should  be  the  maximum  length  of  time  for  which  loans 
are  made? 

The  By-Laws  may  fix  a  general  maximum,  but  the  time  of 
individual  loans  should  Be  fixed  by  the  Credit  Committee  with 
due  regard  for  the  nature  of  the  employment  in  which  the  mem- 
bers are  engaged,  their  ability  to  repay,  and  the  objects  for  which 
loans  are  made.  A  maximum  of  one  year  should  be  sufficient 
even  though  it  may  be  necessary  at  the  expiration  of  that  time 
to  renew  a  portion  of  the  loan. 

How  should  loans  he  repaid? 

Loans  should  be  repaid  in  weekly  or  monthly  instalments 
or  in  a  single  sum.  This  is  to  be  determined  in  each  instance 
by  the  Credit  Committee. 

How  are  loans  secured? 

Ordinarily  the  security  that  a  Credit  Union  demands  for 
loans  is  the  promissory  note  of  the  borrower  with  one  or  more 
endorsements,  supplemented  by  a  lien  upon  the  borrower's 
shares  and  deposits  in  the  Credit  Union.  The  requirement  of 
endorsements  may  be  waived  in  some  cases  if  the  loan  is  for  a 
small  amount.  Large  loans  may  also  be  made  to  members  upon 
security  of  mortgage  of  real  or  personal  property,  but  unless  the 
Credit  Union  has  an  abundance  of  funds,  preference  should  be 
given  to  the  smaller  loans. 

Who  may  endorse? 

As  a  rule  members  only  should  be  accepted  as  endorsers. 
In  exceptional  cases  non-members  may  be  permitted  to  endorse 
for  members.  In  either  case  the  endorsers  must  be  acceptable 
to  the  Credit  Committee. 

Is  such  security  ample? 

As  the  plan  upon  which  Credit  Unions  are  organized  pro- 
vides a  basis  of  acquaintanceship  and  knowledge  of  each  mem- 
ber's character  and  reputation,  it  is  assumed  that  no  loan  will 
be  made  until  the  Credit  Committee  is  possessed  of  all  necessary 
information  regarding  the  borrower  and  his  endorsers,  and  the 
purpose  of  the  loan.  The  mutual  responsibility  of  members 
and  their  self-interest  will  cause  such  watchfulness  over  loans  as 
to  make  the  possibility  of  loss  remote.  This  has  been  the  uniform 
experience  of  Credit  Unions. 


20 

May  additional  security  he  required? 

The  Credit  Committee  may,  if  it  deems  it  necessary,  require 
additional  security  upon  any  loan  in  the  form  of  additional 
endorsements,  a  mortgage  or  other  collateral. 

What  income  has  a  Credit  Union? 

A  Credit  Union  has  two  kinds  of  income : 

1.  Reserve  income. 

2.  Ordinary  income. 

What  is  the  reserve  income? 

The  reserve  income  consists  of  entrance  or  initiation  fees, 
transfer  fees,  fines,  and  similar  forms  of  income  which  do  not 
appear  in  the  profit  and  loss  account,  but  which,  after  the  pay- 
ment of  organization  expenses,  are  carried  directly  to  the 
Guaranty  Fund. 

What  is  the  ordinary  income? 

The  ordinary  income  consists  of  interest  received  on  loans 
and  income  from  investments  or  deposits  made  by  the  Credit 
Union.  The  ordinary  income  constitutes  the  gross  profits  of 
the  Credit  Union. 

What  are  the  net  profits? 

The  net  profits  consist  of  the  gross  profits  after  deducting 
interest  paid  or  accrued  and  unpaid  on  loans  and  deposits,  ex- 
penses, and  losses."^ 

How  are  net  profits  distributed? 

The  net  profits  of  a  Credit  Union  are  distributed  as  follows : 

1.  A  certain  percentage  is  set  apart  to  the  Guaranty  Fund. 
This  percentage  is  fixed  by  law  where  Credit  Union  legislation 
exists,  otherwise  it  should  be  fixed  in  the  By-Laws.  Generally 
25%  is  set  aside  in  this  way  until  an  adequate  Guaranty  Fund  is 
accumulated. 

2.  Such  part  of  the  balance  as  may  be  decided  upon  may 
be  distributed  as  dividends  among  the  shareholders. 

3.  The  balance  remaining  is  carried  as  surplus,  or  undivided 
profits. 

•Under  the  New  York  law  losses  may  be  charged  to  the  Guaranty  Fund  so 
that  only  when  losses  exceed  the  Guaranty  Fund  need  they  be  deducted  from  gross 
profits. 


21 

What  is  the  purpose  of  the  Guaranty  Fund? 

The  Guaranty  Fund  provides  protection  for  depositors  and 
other  creditors  of  the  Credit  Union  as  well  as  protection  for 
shareholders  in  the  event  of  losses.  The  Guaranty  Fund  is  the 
property  of  the  Credit  Union  and  no  share  in  it  may  be  claimed 
by  any  member  except  upon  the  dissolution  of  the  Credit  Union, 

When  are  dividends  declared? 

Dividends,  as  a  rule,  are  declared  annually  at  the  end  of  the 
fiscal  year. 

Should  the  rate  of  dividends  be  limited? 

Credit  Unions  organized  in  states  which  have  not  definitely 
limited  the  charges  upon  loans  to  a  reasonable  rate  should  fix 
a  maximum  dividend  rate  in  the  By-Laws  in  order  that  there  may 
be  no  incentive  to  increase  unduly  the  cost  of  loans  to  borrowing 
members.  This  is  not  so  important  in  the  State  of  New  York 
for  the  law  limits  the  charge  upon  loans  to  12%  per  annum. 

What  is  the  fiscal  year? 

The  fiscal  year  is  the  financial  year.  It  may  be  the  calendar 
year  as  under  the  New  York  Credit  Union  law,  or  it  may  be 
from  November  1st  to  October  31st,  as  is  the  case  under  the 
Massachusetts  statute.  Where  there  is  no  statutory  provision, 
the  fiscal  year  may  be  any  12  months,  but  the  calendar  year  is 
always  to  be  preferred. 

Where  does  the  control  of  a  Credit  Union  rest? 

The  absolute  control  of  a  Credit  Union  lies  in  its  member- 
ship. Though  many  powers  are  delegated  to  Directors,  Officers 
and  Committees,  the  members  may  always  reverse  their  decisions. 

How  often  should  members  meet? 

Members  may  meet  as  often  as  they  choose  but  they  should 
meet  at  least  once  a  year.  Meetings  not  prescribed  in  the  By- 
Laws  are  special  meetings.  Those  so  prescribed  are  regular 
meetings. 

When  is  the  Annual  Meeting  to  be  held? 

The  Annual  Meeting  should  be  held  once  a  year  within  a 
reasonable  time  after  the  close  of  each  fiscal  year.  The  date  of 
the  Annual  Meeting  should  be  fixed  in  the  By-Laws. 


22 

What  is  the  purpose  of  the  Annual  Meeting? 

The  purpose  of  the  Annual  Meeting  is  to  receive  the  re- 
ports of  the  Directors,  Officers,  and  Committees  for  the  pre- 
ceding year ;  to  take  action  upon  such  reports ;  to  elect  Directors 
and  Committees  for  the  current  year,  and  to  transact  such  other 
business  as  may  properly  come  before  it. 

What  should  he  a  quorum  at  a  members'  meeting? 

The  holding  of  a  meeting  should  not  be  made  difficult  by 
requiring  too  large  a  number  of  members  for  a  quorum.  A 
majority  of  the  membership  is  a  satisfactory  number  for  a 
quorum. 

What  should  he  the  order  of  business  at  regular  meetings? 
The  order  of  business  should  be  as  follows: 

1.  Roll  Call. 

2.  Reading  of  the  Minutes  of  the  preceding  meeting. 

3.  Report  of  President. 

4.  Report  of  Treasurer. 

5.  Report  of  the  Credit  Committee. 

6.  Report  of  the  Supervisory  Committee. 

7.  Unfinished  business. 

8.  New  business. 

9.  Adjournment. 

What  should  he  the  method  of  voting  at  members'  meetings? 

Voting  may  be  by  ballot  or  by  any  other  method  that  the 
members  may  at  the  time  determine.  But  each  member  should 
have  but  one  vote  and  no  voting  should  be  by  proxy. 

Is  there  any  limit  to  the  powers  that  may  he  exercised  by 
the  members? 

Within  statutory  provisions  and  in  conformity  with  the  By- 
Laws,  there  is  no  limit  to  the  powers  that  the  members  may 
exercise.  They  may  review  the  acts  and  reverse  the  decisions  of 
the  Board  of  Directors,  recall  any  Director,  Officer  or  member 
of  any  Committee,  and  adopt  such  rules  and  regulations  for 
the  conduct  of  the  Credit  Union  as  they  may  see  fit. 

Where  does  the  direct  management  of  a  Credit  Union  rest? 

The  direct  management  rests  in  the  Board  of  Directors, 
Officers,  Credit  Committee,  and  Supervisory  Committee  elected 
at  the  annual  meeting. 


23 

What  should  be  the  number  of  Directors? 

In  states  which  have  enacted  Credit  Union  legislation  the 
minimum  number  of  Directors  is  usually  fixed  by  law.  Whether 
the  number  of  Directors  should  exceed  the  minimum  required 
depends  upon  the  size  of  the  Credit  Union.  If  the  membership 
does  not  exceed  50,  the  number  of  Directors  need  not  exceed 
five.  In  larger  Unions  the  number  may  be  increased  to  seven, 
nine  or  even  more. 

What  are  the  duties  of  the  Board  of  Directors? 

The  Directors  have  the  general  management  of  the  affairs 
of  the  Credit  Union.  Unless  otherwise  provided  in  the  By-Laws 
it  is  their  duty  to  act  upon  applications  for  membership  and  ex- 
pulsion of  members,  to  fix  the  surety  bond  of  the  Treasurer,  to 
determine  the  rate  of  interest  on  loans  and  deposits,  to  declare 
dividends,  to  recommend  amendments  to  By-Laws  and  to  fill 
vacancies  in  their  own  membership  until  the  election  and  qualifica- 
tion of  successors. 

What  are  the  Officers  of  a  Credit  Union? 

The  Officers  usually  consist  of  a  President,  Vice-President, 
Treasurer,  and  Secretary.  These  are  ordinarily  elected  by  the 
Board  of  Directors  out  of  their  own  number  at  a  meeting  held 
immediately  after  the  Annual  Meeting  of  the  members.  In  small 
Credit  Unions  there  is  an  advantage  in  permitting  the  offices  of 
Secretary  and  Treasurer  to  be  held  by  one  member. 

What  are  the  duties  of  the  Credit  Committee? 

The  Credit  Committee  has  complete  charge  of  the  loans 
made  to  members.  It  determines  the  security  upon  which  each 
loan  shall  be  made  and  fixes  the  terms  of  its  repayment.  In 
small  Credit  Unions,  particularly  in  rural  communities,  it  is 
sometimes  advantageous  to  allow  the  Board  of  Directors  to  act 
as  the  Credit  Committee. 

What  are  the  duties  of  the  Supervisory  Committee? 

The  Supervisory  Committee  audits  the  books,  inspects  the 
securities,  cash  and  accounts  of  the  Credit  Union,  and  supervises 
the  acts  of  the  Board  of  Directors,  Credit  Committee  and  the 
Officers. 


24 

Should  the  Officers  be  remunerated  for  their  services? 

No  Director  or  Officer  and  no  member  of  any  Committee, 
as  such,  should  receive  remuneration  for  his  services.  If  the 
Secretary,  Treasurer,  or  other  Officer  acts  as  Executive  Clerk 
or  Business  Manager  of  the  Credit  Union,  he  may,  if  the  mem- 
bers so  decide,  receive  some  compensation,  but  such  compensa- 
tion should  be  nominal.  Large  Credit  Unions  may  find  it  nec- 
essary to  employ  a  paid  Manager  or  Clerk  to  assist  the  Treasurer 
or  executive  officer  but  the  need  for  such  an  outlay  will  be  the 
exception  rather  than  the  rule. 

Why  should  not  Officers,  Directors  and  Committees  be 
compensated  f 

Cooperation,  which  is  the  basis  of  credit  unionism,  means 
mutual  assistance.  If  loans  are  to  be  made  at  reasonable  rates, 
interest  on  deposits  kept  up  to  or  slightly  above  the  savings  bank 
rate,  dividends  paid  upon  shares,  the  credit  of  the  Union 
established  and  maintained — in  short,  if  the  Credit  Union  is  to 
perform  the  service  for  which  it  is  intended,  its  operating  ex- 
pense must  be  kept  at  a  minimum.  Experience  shows  that  mem- 
bers who  have  been  honored  by  their  fellows  by  election  to  the 
Board  of  Directors  or  to  one  of  the  Committees  are  willing  to 
devote  a  reasonable  amount  of  time  to  the  affairs  of  the  Union 
without  thought  of  compensation. 

Is  special  legislation  necessary  in  the  organisation  of  a 
Credit  Union? 

Legislation  is  not  indispensable.  The  Credit  Unions  among 
the  Jewish  farmers  in  the  United  States  were  organized  and  still 
operate  as  voluntary  or  unincorporated  associations.  However, 
legislation  is  desirable  for  the  sake  of  uniformity  in  organiza- 
tion and  operation  and  in  order  that  Credit  Unions  may  receive 
adequate  supervision  and  guidance. 

Is  the  organization  of  a  Credit  Union  difficult? 

The  organization  of  a  Credit  Union  is  extremely  simple. 
Where  there  is  no  special  legislation  all  that  is  needed  is  to  follow 
the  few  fundamental  principles  of  credit  unionism,  but  in  states 
which  have  enacted  Credit  Union  laws,  the  organization  of  a 
Credit  Union  is  more  or  less  technical.     Not  only  must  the  pro- 


25 

visions  of  law  be  adhered  to,  but  the  rules  and  regulations  laid 
down  by  the  Banking  Department  of  the  state,  which  generally 
has  charge  of  this  matter,  must  also  be  followed. 

What  is  the  first  essential  in  organization  f 

The  first  essential  is  leadership.  The  chances  of  success  are 
greatly  enhanced  if  an  energetic  and  upright  man  will  undertake 
the  actual  work  of  organization.  The  history  of  credit  unionism 
shows  the  importance  and  great  value  of  capable,  enthusiastic 
leadership.  This  applies  not  only  to  organization  but  also  to 
operation.  Unless  trustworthy  and  efficient  officers  are  chosen 
the  Credit  Union  is  not  likely  to  succeed.         i         /£:_ . 

What  is  the  procedure  tn  organisation?     '  ^  — ^-'- 

The  organization  of  a  Credit  Union  ordinarily  requires  the 
holding  of  three  meetings — the  preliminary,  intermediate  and 
final  organization  meetings,  but  where  the  law  or  the  regulations 
of  the  Banking  Department  do  not  provide  to  the  contrary,  any 
two,  or  even  all  three  of  these  meetings  may  be  combined  into  one. 

How  is  the  preliminary  organization  meeting  to  he 
conducted? 

The  following  should  be  the  order  of  business  of  the 
preliminary  organization  meeting: 

1.  Statement  of  the  purpose  of  the  meeting.  (See  page  32 
for  form  of  minutes). 

2.  Election  of  temporary  Chairman  and  Secretary. 

3.  General  discussion. 

4.  Adoption  of  resolution  to  form  a  Credit  Union. 

5.  Election  of  Committee  on  Organization  to  draft  Articles 
of  Incorporation  and  By-Laws. 

6.  Setting  date  for  the  intermediate  organization  meeting. 

What  steps  should  he  taken  hy  the  Organization  Committee 
between  the  preliminary  and  intermediate  organization  meetings? 

The  Organization  Committee  should  at  once  draft  the 
Articles  of  Incorporation  and  By-Laws.  In  states  where  Credit 
Union  legislation  exists,  application  should  be  made  to  the  Bank- 
ing Department  for  blank  form  of  Articles  of  Incorporation  and 
suggested  form  of  By-Laws  and  the  drafts  when  completed 
should  be  submitted  to  the  Banking  Department  for  preliminary 


26 

approval  before  the  intermediate  organization  meeting  is  held. 
(Specimen  Articles  of  Incorporation — Organization  Certificate — 
and  By-Laws  will  be  found  on  pages  35  to  46). 

How  is  the  intermediate  organisation  meeting  to  be 
conducted? 

1.  A  temporary  Chairman  and  Secretary  should  be  elected. 
(See  page  33  for  form  of  minutes). 

2.  Report  of  the  Organization  Committee. 

3.  Adoption  and  signing  of  Articles  of  Incorporation. 

4.  Adoption  of  By-Laws. 

5.  Election  of  Directors. 

6.  Election  of  the  Credit  Committee. 

7.  Election  of  the  Supervisory  Committee. 

8.  Adoption  of  resolution  authorizing  the  Organization 
Committee  to  take  the  necessary  steps  to  obtain  a  charter  or 
certificate  of  authorization. 

Where  Credit  Union  legislation  exists  the  beginning  of 
operations  must  await  the  granting  of  the  charter  or  authoriza- 
tion certificate.  In  states  which  have  no  Credit  Union  laws  and 
the  Credit  Union  is  formed  as  a  voluntary  association,  organiza- 
tion may  be  completed  and  operations  begun  at  once. 

How  is  the  final  organization  to  he  conducted? 
\.     A  temporary  Chairman  and  Secretary  should  be  elected. 
(See  page  34  for  form  of  minutes). 

2.  Report  of  the  Organization  Committee. 

3.  Fixing  of  entrance  fee  and  other  fees  not  fixed  by  By- 
Laws  or  left  to  the  discretion  of  the  Board  of  Directors. 

4.  Election  of  additional  members. 

5.  Adoption  of  resolution  authorizing  the  Directors,  the 
Credit  Committee  and  the  Supervisory  Committee  to  perform  all 
acts  necessary  for  the  proper  conduct  of  the  Credit  Union. 

Immediately  after  the  adjournment  of  the  intermediate 
organization  meeting,  each  member  of  the  Board  of  Directors 
and  each  member  of  the  Credit  Committee  and  of  the  Super- 
visory Committee  should  take  such  oath  of  office  as  is  prescribed 
by  the  law  under  which  the  Credit  Union  may  be  organized.* 


*  No  form  of  oath  is  suggested  as  it  is  advisable  for  Credit  Unions  to  apply  to 
the  Banking  Department  or  other  supervisory  state  authority  for  authorized  form. 


27 

Such  oath  should  be  certified  by  an  officer  authorized  by  law  to 
administer  oaths,  such  as  a  Justice  of  the  Peace  or  a  Notary 
Public,  and  should  be  immediately  transmitted  to  the  Superin- 
tendent of  Banks.  A  similar  oath  should  be  taken  immediately 
after  the  adjournment  of  the  first  meeting  of  the  Board  of 
Directors  by  the  Officers  elected  at  that  meeting. 

When  is  the  first  meeting  of  the  Board  of  Directors  to  he 
held? 

The  first  meeting  of  the  Board  of  Directors  should  be  held 
immediately  after  the  adjournment  of  the  final  organization  meet- 
ing.   It  is  to  be  conducted  somewhat  as  follows : 

1.  Election  of  officers.     (See  page  47  for  form  of  minutes). 

2.  Fixing  the  amount  of  the  Treasurer's  bond. 

3.  Fixing  the  rate  of  interest  on  loans  and  deposits. 

4.  Fixing  the  entrance  fee  and  other  fees  not  fixed  in  the 
By-Laws  or  by  the  members. 

5.  Election  of  new  members. 

6.  Adoption  of  books  of  account  and  forms  for  the  con- 
duct of  the  business  of  the  Credit  Union. 

When  is  the  first  meeting  of  the  Credit  Committee  to  he 
held? 

The  first  meeting  of  the  Credit  Committee  should  be  held 
as  soon  after  the  final  organization  meeting  as  convenient.  It 
should  be  conducted  somewhat  as  follows : 

1.  Election  of  a  permanent  Chairman  who  shall  also  act 
as  Secretary.     (See  page  48  for  form  of  minutes). 

2.  Adoption  of  plans  and  suitable  forms  for  the  conduct 
of  the  business  of  the  Committee  in  accordance  with  the  By-Laws. 

3.  Consideration  of  applications  for  loans. 

When  is  the  first  meeting  of  the  Supervisory  Committee  to 
he  held? 

The  first  meeting  of  the  Supervisory  Committee  should  be 
held  as  soon  after  the  final  organization  meeting  as  convenient. 
It  should  be  conducted  somewhat  as  follows : 

L  Election  of  a  permanent  Chairman  who  shall  also  act 
as  Secretary.     (See  page  49  for  form  of  minutes). 

2.  Adoption  of  plans  and  suitable  forms  for  the  conduct 
of  the  business  of  the  Committee  in  accordance  with  the  By-Laws. 


28 


BOOKS  AND  FORMS. 

The  following  books  and  forms  are  needed  for  the  proper 
conduct  of  a  Credit  Union: 

1.  Application  for  membership. 

2.  Subscription  for  shares. 

3.  Certificate  of  shares. 

4.  Membership  book. 

5.  Meeting  notices. 

6.  Minute  books. 

a.  Members'  minute  book. 

b.  Minute  book  of  Directors. 

c.  Minute  book  of  Credit  Committee. 

d.  Minute  book  of  Supervisory  Committee. 

7.  Pass  book. 

8.  Deposit  slip. 

9.  Check  book. 

10.  Bank  book. 

11.  Loan  application. 

12.  Promissory  note. 

13.  Tickler  book. 

14.  Interest  table. 

15.  Cash  book. 

16.  Individual  and  general   ledgers. 

17.  Report  and  financial  statement. 

1.     APPLICATION  FOR  MEMBERSHIP. 

This  application  form  should  be  filled  in  by  all  who  apply 
for  membership.  It  should  be  made  out  in  ink  and  all  names 
written  in  full. 

All  applications  of  elected  members,  in  their  numerical 
order,  should  be  pasted  in  the  membership  book. 

Rejected  applications  should  not  be  numbered,  but  should 
be  filed  and  retained  for  future  reference. 

In  the  case  of  charter  members,  the  blanks  opposite  "Pro- 
posed by"  and  "Seconded  by"  need  not  be  filled  in. 


29 


APPLICATION  FOR  MEMBERSHIP. 


No...... 


THE 


.CREDIT  UNION. 


I  hereby  apply  for  membership  in  the- 


(Date) 
-Credit  Union 


and  agree  to  subscribe  for  at  least  one  share  in  the  said  Credit  Union 
at  a  par  value  of  $ -and  do  further  agree  to  abide  by  the  condi- 
tions prescribed  in  the  By-Laws  of  the- Credit  Union. 

Name    


Residence  

Date    of    birth    

Married  or  single  ... 
By  whom  employed. 
Where  employed  — 
In  what  capacity 


How  long  in  present  position 


Proposed  by  — 
Seconded  by  — 
Elected   (date)   • 


(Signed) 


Secretary. 


2.     SUBSCRIPTION  FOR  SHARES. 

THE CREDIT  UNION. 


I  hereby  subscribe  for 


Credit  Union  of  the  par  value  of  $.. 


(Date) 


)  shares  in  the- 
— payable 


share. 


in.- instalments  o f  per 

(weekly   or  monthly) 


Member's  No.  

Shares  previously  subscribed  for 

Shares  wholly  paid  for 


Approved 
Date  


Treasurer. 


(Signature) 


30 
3.     CERTIFICATE  OF  SHARES. 

Having  been  elected  to  membership  by  the  Board  of  Di- 
rectors and  having  become  the  owner  of  one  or  more  shares, 
each  member  should  receive  a  Certificate  of  Shares  signed  by 
the  President  and  Secretary.  The  certificate  is  to  be  retained 
by  the  member  as  evidence  of  his  membership  and  ownership  of 
shares  and  must  be  surrendered  when  he  borrows  from  the  Credit 
Union.  Whenever  a  member  withdraws  a  part  of  his  paid  up 
shares  or  becomes  the  owner  of  additional  shares  a  new  certifi- 
cate should  be  issued  to  him  and  the  old  one  destroyed. 

Certificates  should  be  numbered  consecutively.  They 
should  be  printed  upon  small  cards  of  good  quality  and 
thickness. 

CERTIFICATE  OF  SHARES. 

Transferable  only  to  qualified  members. 

No 

The  Credit  Union. 

This  certifies  that - is  the  owner 

of  shares,  par  value  $- each,  in  The 

Credit  Union  in  the  city  of ,  state  of , 

and  has  been  duly  elected  a  member  thereof. 
191 


President.  Secretary. 


4.     MEMBERSHIP  BOOK. 


Any  ordinary  bound  book  containing  an  alphabetical  in- 
dex at  the  beginning,  will  serve  as  the  membership  book. 

The  full  names  of  all  members  should  be  listed  alpha- 
betically in  the  index  and  their  applications  pasted  in  the  mem- 
bership book  in  numerical  order. 

The  membership  book  serves  as  a  permanent  record  of 
each  member,  including  his  signature.  It  should  be  in  the 
custody  of  the  secretary  who  is  responsible  for  its  safe  keeping 
and  whose  duty  it  is  to  keep  it  up-to-date. 


31 
5.     MEETING  NOTICES. 

NOTICE  OF  REGULAR  MEETING. 

The  Credit  Union. 

The  Annual  Meeting  of  the  members  of  the Credit 

Union  will  be  held  on the of ,  191, 

(day)  {month  and  year) 

at M  sharp  at 

(hour)  (street  and  number) 

You  are  urgently  requested  to  be  present. 
By  order  of  the  President. 


Secretary. 


NOTICE  OF  SPECIAL  MEETING. 

The Credit  Union. 

A  special  meeting  of  the  members  of  the Credit 

Union  will  be  held  on ,  the of 191  , 

at  M,  at  for  the  purpose  of 


You  are  urgently  requested  to  be  present. 
By  order  of  the  President. 


Secretary. 


6.     MINUTE  BOOKS. 

a.     Members*  Minute  Book. 

The  Members'  Minute  Book  should  be  in  the  custody  of 
the  Secretary,  and  should  contain  a  permanent  record  of  the 
proceedings  of  all  meetings  of  the  members.  For  the  purpose 
of  roll  call,  it  should  contain  on  the  first  pages  a  list  of  all  the 
members  in  the  order  in  which  they  were  admitted  to  mem- 
bership. It  should  also  contain  the  minutes  of  the  organiza- 
tion meetings,  including  a  true  copy  of  the  Articles  of  In- 
corporation and  By-laws.  A  printed  copy  of  the  law,  if  any, 
under  which  the  Credit  Union  is  organized  should  be  attached 
to  the  inside  cover  of  the  members'  minute  book  for  reference. 


32 
FORM  OF  MINUTES. 

Preliminary    Organisation    Meeting. 


191. 


The  preliminary  organization  meeting  of  the 

Credit  Union  was  held  on ,   191 ,  at- 

o'clock  P.  M.,  at  the  residence  of at — 


The  following  were  present: 


(Insert  in  full  the  names  of  all  present) 

The  meeting  was  called  to  order  by who  outlined 

the  objects  of  the  meeting  and  pointed  out  the  benefits  which  the  or- 
ganization of  a  Credit  Union  would  confer  upon  the  (employees,  members, 
residents,   etc. )    of 

On  motion, was  duly  elected  Temporary 

Chairman  of  the  meeting  and  •- - —  was  duly  elected 

Secretary. 

Following  a  general  discussion  it  was  voted,  on  motion  duly  made 
and  seconded,  to  proceed  with  the  formation  of  a  Credit  Union. 

Upon  motion  made  and  duly  seconded,  it  was  voted  to  proceed 
to  the  election  of  a  Committee  on  Organization  and  to  authorize  such 
committee  to  draft  Articles  of  Incorporation  (or  Organization  Certifi- 
cate)* and  By-Laws  and  to  act  for  the  Credit  Union  until  organization  is 

effected.     Thereupon   ,   —-and 

were   duly  elected  a  Committee  on 

Organization. 

It  was  voted  to  hold  an  intermediate  organization  meeting  on 

at o'clock  P.  M.  at  which  time  a  report  of  the  Organization 

Committee  will  be  submitted. 

There  being  no  further  business,  the  meeting  adjourned  at 

o'clock  P.  M. 


Secretary. 


•Blank  form  of  Organization  Certificate  may  be  procured  from  the  Banking 
Department  in  states  having  Credit  Union  laws.  Suggested  form  of  Organization 
Certificate  and  By-Laws  which  have  been  approved  by  the  Banking  Department  of 
New   York  will   be   found   on   pages   35   to   46. 


33 

Intermediate    Organization   Meeting. 

The  intermediate  organization  meeting  of  the  Credit 

Union  was  held  on - ,  191 —  at o'clock  P.  M. 

at  the  residence  of ,  , 


The  following  were  present: 


(Insert  in  full  the  names  of  all  present) 

The    meeting    was    called    to    order    by ,    Chair- 
man of  the  Organization  Committee. 

On  motion  duly  made  and  seconded  it  was  voted  that 

should  serve  as   Chairman   of   the  meeting,  and as 

Secretary. 

'  The  Chairman  of  the  Organization  Committee  submitted  a  draft  of 
Articles  of  Incorporation  (Organization  Certificate)  and  By-Laws,  which 
he  reported  had  been  first  submitted  to  the  Banking  Department  and  its 
preliminary  approval  obtained.  After  discussion,  upon  motion  duly  made 
and  seconded,  the  Articles  of  Incorporation  (Organization  Certificate) 
and  the  By-Laws,  as  recommended  by  the  Organization  Committee  were 
adopted  and  signed  by  all  the  incorporators. 

On  motion  duly  made  and  seconded,  it  was  voted  to  proceed  to  the 

election  of  five  Directors  as  provided  in  the  By-Laws  and , 

,  , and 


„ were   thereupon  elected  Directors   to  serve 

until  the  next  annual  meeting  of  the  members,  or  until  their  successors 
are  elected  and  have  qualified. 

Upon  motion  duly  made  and  seconded  it  was  voted  to  proceed  to 
the  election  of  a  Credit  Committee  of  five  members  and  a  Supervisory 

Committee  of  three  members  as  provided  in  the  By-Laws.  , 

.  .  and 


were  regularly  elected  members  of  the  Credit  Com- 
mittee  and ,   - ,  and 

were  regularly  elected  members  of  the  Supervisory  Committee  to  serve 
until  the  next  annual  meeting  of  the  members,  or  until  their  successors 
are  elected  and  have  qualified. 

It  was  voted  to  authorize  the  Organization  Committee  to  proceed 
to  obtain  from  the  Banking  Department  a  Certificate  of  Authorization 
and  to  complete  the  organization  of  the  Credit  Union. 

The  meeting  then  adjourned  at- o'clock  P.  M. 


Secretary. 


34 
Final  Organisation  Meeting. 

- ,  ,  191 

The   final   organization   meeting   of   the Credit 

Union  was  held  on  ,   191 at  - - 

o'clock  P.  M.  at  the  residence  of ,  - — , 


The  following  were  present: 


{Insert  in  full  the  names  of  all  present) 

The  meeting  was  called  to  order  by ,  Chair- 
man of  the  Organization  Committee. 

On  motion  duly  made  and  seconded  it  was  voted  that - 

should  serve  as  Chairman  of  the  meeting  and  that should 

serve  as  Secretary. 

The  Chairman  of  the  Organization  Committee  reported  that  the  Bank- 
ing Department  had  approved  the  Organization  Certificate  and  the  By- 
laws adopted  at  the  last  meeting  and  had  issued  to  the 

Credit  Union  a  Certificate  of  Authorization. 

Upon  motion  duly  made  and  seconded  it  was  voted  that  the  Organi- 
zation Certificate,  By-Laws  and  Certificate  of  Authorization  become  a 
part  of  the  minutes  of  this  meeting. 

Upon  motion  duly  made  and  seconded  it  was  voted  that  the  entrance 
fee  which   the   By-Laws   provide   shall  be   paid  by   each   member,    shall 

be  for  each  share  issued  and  that  the  transfer  fee  which 

the  By-Laws  provide  shall  be  paid  upon  the  transfer  of  shares  from  one 
member  to  another,  shall  be  — -- 

The    meeting    then    proceeded    to    elect    the    following    additional 

members. 

Proposed  by  Seconded  by 


On  motion  duly  made  and  seconded,  it  was  voted  that  the  Board 
of  Directors,  Credit  Committee  and  the  Supervisory  Committee  be 
authorized  to  do  and  perform  all  acts  in  conformity  with  the  law  and 

the  By-Laws  necessary  for  the  proper  conduct  of  the 

— - — Credit  Union. 

There  being  no  further  business  the  meeting  adjourned  at 
o'clock  P.  M. 


Secretary. 


35 


ORGANIZATION    CERTIFICATE  OF  CREDIT  UNION.* 

•Blanks  for  organization  certificate  of  Credit  Unions  in  New  York  State  should 
be   procured    from   the    State    Banking    Department    at   Albany. 

We,  the  undersigned,  all  being  of  full  age  and  employed  or  residing 

in  the  State  of  New  York,  and  •-- - of  us  being 

citizens  of  the  United  States,  for  the  purpose  of  becoming  incorporated 
as  a  Credit  Union,  pursuant  to  the  provisions  of  Article  XI  of  the  Bank- 
ing Law,  Chapter  2  of  the  Consolidated  Laws,  do  hereby  certify : 

1.  That  the  name  of  the  proposed  corporation  is ~ — 

- — Credit   Union. 

2.  That  the  place  where  its  business  is  to  be  transacted  is 


3.  That  the  par  value  of  its  shares  is dollars 

4.  That  the  full  name,  residence  and  post-office  address  of  each  of 
the  incorporators  and  the  number  of  shares  subscribed  for  by  each,  are 
as  follows : 

Post-Office  No.  of 

Name  Residence  address  shares  subscribed 


5.  That  the  term  of  its  existence  shall  be 

6.  That  the  number  of  its  directors  is — and  the  names  and 

addresses  of  the  incorporators  who  shall  be  its  directors  until  the  first 
annual  meeting  of  its  shareholders  are  as  follows : 

Names  Addresses 


IN  WITNESS  WHEREOF,  we  have  made,  signed  and  acknowledged 
this  certificate  in  duplicate,  this day  of 191 


36 


STATE  OF  NEW  YORK  ) 
COUNTY  OF  Us. 

CITY  OF  J 

On   this   day   of- 

before   me  ~ 


191 — ,   personally    appeared 


to  me  known  to  be  the  persons  described  in  and  who  executed  the  fore- 
going certificate  and  severally  acknowledged  that  they  executed  the  same. 


*The  signature  of  the  Notarjr  Public  or  Commissioner   of   Deeds  who   takes  the 
acknowledgments  must  be  authenticated  by  a   County   Clerk's  certificate. 


37 


BY-LAWS. 

ARTICLE  I 

Name. 

The  name  of  this  corporation  shall  be  the  Credit 

Union  of  — - - 

ARTICLE  II 

Purposes. 

The  purposes  of  this  Credit  Union  shall  be  to  promote  thrift  aimong 
its  members  and  to  make  loans  to  its  members  at  reasonable  rates,  with 
or  without  security. 

ARTICLE  III 

Membership. 

Any  of  upon 

his  election  to  membership  and  upon  subscribing  for  one  or  more  shares 
and  paying  for  the  same  in  whole  or  in  part,  together  with  the  entrance 
fee  as  provided  in  Article  X  of  these  By-Laws  shall  become  a  member 
of  this  Credit  Union. 

ARTICLE  IV 

Meetings  of  Members. 

Section  1.  The  annual  meeting  of  the  members  shall  be  held  on 
the  third  Tuesday  of  January  of  each  year.  General  meetings  of  mem- 
bers shall  also  be  held  quarterly  on  the  third  Tuesdays  of  April,  July 
and  October  of  each  year.  A  notice  of  all  meetings  of  the  members 
shall  be  mailed  by  the  Secretary  to  each  member  not  less  than  five  nor 
more  than  10  days  prior  to  such  meetings. 

Section  2.  One-half  of  the  members  shall  constitute  a  quorum.  If 
a  quorum  is  not  present  on  the  date  first  appointed,  the  meeting  shall 
be  adjourned  for  10  days  and  a  second  notice  shall  be  sent  to  all  mem- 
bers, at  which  time  those  members  present  shall  constitute  a  quorum 
for  the  transaction  of  all  business. 

Section  3.  Each  member  shall  have  but  one  vote.  No  vote  shall 
be  cast  by  a  proxy.  When  not  otherwise  provided  in  these  By-Laws  the 
vote  of  the  majority  of  the  members  present  at  a  meeting  shall  be  the 
act  of  the  corporation. 

Section  4.  The  order  of  business  of  the  meetings  of  the  members 
shall  be  as  follows : 

a.  Roll  Call. 

b.  Reading  of  the  Minutes  of  the  Last  Meeting. 

c.  Report  of  the  Directors. 


38 

d.  Report  of   the   Treasurer. 

e.  Report  of  the  Credit  Committee. 

f.  Report  of  the  Supervisory  Committee. 

g.  Unfinished  business, 
h.  New  business. 

i.    Adjournment. 

Section  5.  The  members  by  a  majority  vote  of  all  the  shareholders 
shall  have  the  power  to  review  the  acts  and  reverse  the  decisions  of 
the  Board  of  Directors  of  this  Credit  Union. 

Section  6.  The  Board  of  Directors  may  at  its  discretion  call  special 
meetings  of  the  members  and  shall  do  so  upon  the  order  of  the  Super- 
visory Committee  or  upon  the  request  of  any  10  members  of  the 
Credit  Union  in  writing.  Notice  of  such  special  meetings,  wherein  the 
purpose  of  the  meetings  shall  be  clearly  stated,  shall  be  sent  by  the 
Secretary  to  each  member  as  provided  in  Section  1  of  this  Article.  No 
other  business  than  that  specified  in  the  written  notice  shall  be  trans- 
acted at  such  meetings. 

Section  7.  The  fiscal  year  of  this  Credit  Union  shall  end  on  the 
thirty-first   day  of  December. 

ARTICLE  V. 
Directors. 

Section  1.  At  the  annual  meeting  the  members  of  this  Credit  Union 
shall  elect  a  Board  of  Directors  of  five  members,  a  Credit  Committee 
of  five  members,  and  a  Supervisory  Committee  of  three  members  to 
serve  until  the  next  annual  meeting  of  the  shareholders  and  until  their 
successors  are  elected  and  have  qualified.  No  member  of  the  Board 
of  Directors  shall  serve  on  the  Supervisory  Committee  nor  shall  any 
member  of  the  Supervisory  Committee  serve  on  the  Board  of  Directors. 

Section  2.  A  meeting  of  the  newly  elected  Board  of  Directors  shall 
be  held  within  10  days  after  the  annual  meeting  of  shareholders,  and 
the  Board  of  Directors  shall  elect  from  their  number  a  President,  a 
Vice-President,  a  Secretary  and  a  Treasurer  who  shall  be  the  executive 
officers  of  this  Credit  Union.  Thereafter  the  Board  of  Directors  shall 
meet  at  least  once  in  each  month.  At  all  meetings  three  members  shall 
constitute  a  quorum. 

Section  3.  The  Board  of  Directors  shall  have  the  general  manage- 
ment of  the  affairs,  funds  and  records  of  this  Credit  Union.  It  shall 
be  their  special  duty  to  act  upon  all  applications  for  membership  and 
the  expulsion  of  members;  to  fix  the  amount  of  the  surety  bond  of 
the  Treasurer;  to  determine  the  rate  of  interest  on  loans  and  deposits; 
to  declare  dividends;  to  fix  the  maximum  number  of  shares  which  may 
be  held  by  any  one  member;  to  recommend  amendments  to  these  By- 
Laws;  to  fill  vacancies  in  the  Board  until  the  election  and  qualification 
of  successors,  and  to  perform  such  other  duties  as  the  members  may 
from  time  to  time  authorize. 


39 

Section  4.  No  officer  or  other  member  of  the  Board  of  Directors 
shall  receive  compensation  for  his  services  with  the  exception  of  the 
Treasurer,  (or  Secretary)  whose  remuneration,  if  any,  shall  be  fixed  by 
the  members. 

Section  5.  The  members  may,  at  a  special  meeting  called  for  that 
purpose,  declare  by  a  two-thirds  vote  of  all  the  members  the  office  of 
any  member  of  the  Board  of  Directors  vacant,  provided  said  meeting 
was  called  in  accordance  with  the  provisions  of  Article  IV,  Sections  1  and 
6  of  these  By-Laws. 

ARTICLE  VI 
Officers  and  Their  Duties. 

Section  1.  The  officers  of  this  Credit  Union  shall  consist  of  a  Presi- 
dent, Vice-President,  Treasurer  and  Secretary. 

Section  2.  The  duties  of  the  President  shall  be  to  preside  at  meetings 
of  the  members  or  of  the  Board  of  Directors;  to  countersign  such 
checks,  drafts  and  notes  drawn  by  the  Credit  Union  as  may  require  his 
signature,  and  to  perform  the  other  usual  duties  connected  with  the 
office. 

Section  3.  The  Vice-President  shall,  in  the  event  of  the  disability 
of  the  President,  perform  the  duties  of  the  President  and  such  other 
duties  as  the  Board  of  Directors  may  from  time  to  time  prescribe. 

Section  4.  The  Treasurer  shall  be  the  custodian  of  the  funds,  se- 
curities, books  of  account  and  all  other  valuable  papers  of  the  Credit 
Union.  He  shall  keep  a  separate  set  of  books  of  entry,  containing  in 
detail  the  financial  transactions  of  the  Credit  Union.  He  shall  sign  all 
checks,  drafts  and  notes  drawn  by  the  Credit  Union.  The  Treasurer 
shall  furnish  a  bond  for  the  faithful  performance  of  his  duties  in  such 
amount  as  the  Board  of  Directors  shall  prescribe. 

Section  5.  The  Secretary  shall  keep  correct  records  of  all  meetings 
of  the  members  and  of  the  Board  of  Directors.  He  shall  give  notice 
of  all  meetings  of  the  members  in  the  manner  prescribed  by  the  By-Laws 
and  shall  perform  all  other  duties  incident  to  his  office.  In  the  event 
of  the  disability  of  the  Treasurer  his  duties  shall  be  performed  by  the 
Secretary. 

ARTICLE  VII 
Credit  Committee. 

Section  1.    The  Credit  Committee  shall  consist  of  five  members. 

Section  2.  The  Credit  Committee  shall  approve  every  loan  made 
by  this  Credit  Union  to  its  members.  Every  application  for  a  loan  shall 
be  made  in  writing  and  shall  state  the  purpose  for  which  the  loan  is 
desired  and  the  nature  of  the  security  offered.  No  loan  shall  be  made 
unless  it  has  received  the  unanimous  approval  of  those  members  of  said 
committee  who  were  present  when  it  was  considered,  who  must  be  at 
least  a  majority  of  said  committee,  nor  if  any  member  of  said  committee 
shall  disapprove  thereof. 


40 

Section  3.  The  Credit  Committee  may  meet  at  any  time  and  shall 
meet  as  often  as  necessary.  The  Chairman  of  the  Credit  Com- 
mittee shall  notify  each  member  in  advance  of  every  meeting  of  the 
Committee.  The  Credit  Committee  shall  keep  a  record  of  its  proceedings 
in  a  special  book  provided  for  that  purpose. 

ARTICLE  VIII 

Supervisory  Committee. 

Section  1.  The  Supervisory  Committee  shall  consist  of  three  mem- 
bers who  shall  be  elected  annually.  The  Supervisory  Committee  shall 
meet  at  least  once  every  three  months  to  audit  the  books  of  this  Credit 
Union  and  make  reports  of  the  same  to  the  members. 

Section  2.  The  Supervisory  Committee  shall  inspect  the  securities, 
cash  and  accounts  of  this  Credit  Union  and  supervise  the  acts  of  its 
Board  of   Directors,   Credit   Committee  and  officers. 

Section  3.  At  any  time  the  Supervisory  Committee,  by  a  unanimous 
vote  at  a  meeting  called  for  that  purpose,  may  suspend  any  member 
of  the  Credit  Committee  or  of  the  Board  of  Directors  or  any  officer, 
and  by  a  majority  vote  may  call  a  meeting  of  the  shareholders  to  con- 
sider any  violation  of  Article  XI  of  the  Banking  Law  or  of  these  By- 
Laws,  or  any  practice  of  this  Credit  Union  which,  in  the  opinion  of  such 
Committee,  is  unsafe  and  unauthorized. 

Section  4.  Within  seven  days  after  the  suspension  of  any  member 
of  the  Board  of  Directors  or  Credit  Committee  or  of  any  officer,  the 
Supervisory  Committee  shall  call  a  special  meeting  of  the  members  to 
take  such  action  relative  to  such  suspension  as  may  seem  necessary. 
A  notice  of  such  meeting  shall  be  mailed  to  each  member  of  this  Credit 
Union  not  less  than  five  days  prior  to  the  date  of  such  meeting.  The 
Supervisory  Committee  shall  fill  vacancies  that  may  occur  in  its  own 
membership  until  the  next  annual  meeting. 

Section  5.  At  the  close  of  each  fiscal  year  the  Supervisory  Com- 
mittee shall  make  an  audit  of  the  books  and  records  and  an  examination 
of  the  business  and  affairs  of  the  Credit  Union  for  the  year  and  shall 
make  a  full  report  of  its  assets  and  liabilities,  receipts  and  disburse- 
ments to  the  Board  of  Directors,  and  shall  cause  such  report  to  be  read 
at  the  annual  meeting  of  shareholders  and  filed  with  the  records  of 
the  Credit  Union. 

Section  6.  The  Supervisory  Committee  shall  keep  a  complete  record 
of  all  its  proceedings.  All  reports  of  this  Committee  shall  be  filed  and 
preserved  with  the  records  of  this  Credit  Union. 

ARTICLE  IX 

Capital. 

The  capital  of  this  Credit  Union  shall  consist  of  the  payments  made 
upon  shares  by  its  members,  and  unpaid  dividends  credited  thereon. 


41 

ARTICLE  X 
Shares. 

Section  1.  The  number  of  shares  which  may  be  issued  by  this 
Credit  Union  shall  be  unlimited. 

Section  2.    The  par  value  of  each  share  shall  be  $5. 

Section  3.  Shares  may  be  paid  for  in  full  at  the  time  of  subscrip- 
tion or  may  be  paid  in  regular  weekly  or  monthly  instalments. 

Section  4.  Whenever  payments  made  by  a  member  upon  instal- 
ment shares  shall  equal  the  par  value  of  a  share  such  payments  shall 
be  transferred  and  he  shall  become  the  owner  of  a  full  paid  share  and 
shall  receive  a  Certificate  of  Shares  signed  by  the  President  and  Secretary. 

Section  5.  An  entrance  fee  to  be  fixed  by  the  members  shall  be 
charged  for  each  share  subscribed  for. 

Section  6.  Fully  paid  shares  may  be  transferred  to  any  person  eligi- 
ble for  membership,  subject  to  the  approval  of  the  Board  of  Directors 
and  the  provisions  of  Section  9  of  this  article  and  upon  the  payment 
of  a  transfer  fee  not  exceeding  $0.25  per  share.  No  transfer  shall 
be  permitted  if  the  transferrer  is  indebted  to  this  Credit  Union. 

Section  7.  The  money  credited  on  one  or  more  shares  may  be  with- 
drawn on  any  day  when  payments  for  shares  may  be  received,  provided 
the  withdrawing  member  has  filed  a  written  notice  of  such  intention; 
but  the  Board  of  Directors  may  require  a  member  at  any  time  to  give 
30  days'  notice  in  writing  of  his  intention  to  withdraw  the  whole 
or  any  part  of  the  amount  paid  in  by  him  on  account  of  shares.  Such 
withdrawing  member  shall  receive  the  amount  paid  by  him  on  account 
of  shares,  together  with  such  dividends  as  have  been  credited  thereto, 
less  any  lawful  fines  or  other  obligations  to  this  Credit  Union.  With- 
drawals shall  be  paid  in  the  order  of  their  filing  and  as  funds  therefor 
become  available.  After  the  filing  of  notice  of  withdrawal  provided 
herein,  the  shares  shall  continue  to  participate  in  the  dividends  until 
they  are  redeemed.  No  member  who  has  filed  a  notice  of  intention  to 
withdraw  shall  exercise  any  of  the  privileges  of  membership. 

Section  8.  The  Board  of  Directors  may  expel  any  member  who 
has  not  carried  out  his  obligations  to  the  Credit  Union,  or  who  has 
been  convicted  of  a  criminal  offense,  or  who  neglects  or  refuses  to 
comply  with  the  provisions  of  the  Statute  under  which  this  Credit 
Union  is  organized,  or  of  the  By-Laws,  or  who  habitually  neglects  to  pay 
his  debts,  or  who  becomes  insolvent  or  bankrupt.  The  members  at 
any  regularly  called  meeting  may  expel  any  member  whose  private  life 
is  a  source  of  scandal.  But  no  member  shall  be  expelled  until  he  has 
been  informed  in  writing  of  the  charges  against  him  and  shall  have 
had  reasonable  opportunity  to  be  heard. 

In  the  event  of  the  expulsion  of  a  member  for  any  cause,  such 
expelled  member  shall  be  deemed  a  withdrawing  member  as  regards  the 
conditions  hereinabove  provided  for  redemption  of  shares.  Any  mem- 
ber who  withdraws  or  is  expelled  shall  not  be  relieved  of  any  liability 
to  the  corporation. 


42 

Section  9.  No  officer,  director,  attorney,  committee  member,  clerk 
or  agent  of  this  Credit  Union  shall  as  an  individual,  discount,  or  di- 
rectly or  indirectly  purchase  from  another  member  a  share  in  this  Credit 
Union,   whether  filed  for  withdrawal  or  not. 

ARTICLE  XI 
Fines. 

A  member  failing  to  make  a  payment  upon  shares  when  due  shall 
pay  a  fine  at  the  rate  of  two  per  centum  per  month  or  fraction  thereof 
on  amounts  in  default,  provided  however,  that  such  fine  shall  in  no 
case  be  less  than  $.05.  If  the  fine  remains  unpaid  for  three  months, 
such  member  shall  be  suspended  from  membership  and  may  at  the  dis- 
cretion of  the  Board  of  Directors,  be  expelled  from  this  Credit  Union, 
and  any  balance  remaining  to  his  credit,  after  deducting  all  sums  due 
this  Credit  Union  shall  be  paid  to  him  by  the  Treasurer. 

ARTICLE  XII 

Deposits. 

Section  1.  The  Credit  Union  may  receive  on  deposit  the  savings 
of  members  in  such  amounts  as  the  Board  of  Directors  may  determine. 

Section  2.  Deposits  shall  draw  interest  beginning  the  first  day  of 
the  month  following  the  day  of  the  making  of  the  deposit. 

Section  3.  The  rate  of  interest  on  deposits  shall  be  determined  by  the 
Board  of  Directors,  quarterly,  in  advance,  and  payable  within  30 
days  after  the  first  day  of  January,  April,  July  and  October,  and  shall 
be  credited  to  the  account  of  the  depositor  or  withdrawn  by  him  at 
his  option. 

Section  4.  Any  depositor  may  withdraw  all  or  part  of  his  deposit 
at  any  time  that  the  office  of  this  Credit  Union  is  open  for  business. 
The  Board  of  Directors  may,  however,  require  30  days'  notice  in 
writing  of  the  depositor's  intention  to  make  the  withdrawal.  Such  with- 
drawals shall  be  honored  in  the  order  in  which  the  notice  therefor 
is  filed,  in  the  same  manner  as  in  the  case  of  withdrawals  of  shares  as 
provided  in  Section  7  of  Article  X  of  these  By-Laws,  provided,  however, 
that  in  the  matter  of  withdrawals,  deposits  shall  be  preferred  over 
shares. 

ARTICLE  XIII 
Power  to  Borrow. 

This  Credit  Union  may  borrow  money  to  an  amount  not  exceed- 
ing 40%  of  its  capital  except  when  its  capital  is  $5,000  or  less,  in  which 
event  it  may  borrow  any  amount  up  to  $2,000,  provided,  however,  that 
the  amount  to  be  borrowed,  the  terms  upon  which  the  loan  is  to  be 
obtained  and  the  name  of  the  prospective  lender  are  in  each  instance  first 
submitted  to  a  meeting  of  the  members  and  the  loan  duly  authorized 
by  them. 


^  Article  XIV.  Sec.  r 

Section   1.    The   capital,   deposits,   ^ua^^..._, 
and  all  other  moneys  of  this  Credit  Union  may  be  invested  in  one  oi 
more  of  the  following  ways  and  in  such  ways  only: 

a.  They  may  be  lent  to  members  for  such  purposes  and  upon  such 
security  and  terms  as  provided  in  Article  XV  of  these  By-Laws. 

b.  They  may  be  deposited  to  the  credit  of  this  Credit  Union  in 
savings  banks,  state  banks  or  trust  companies  incorporated  under  the 
laws  of  the  State  of  New  York,  or  in  national  banks  located  therein. 

ARTICLE  XV 
Loans. 

Section  1.  Loans  may  be  made  to  any  member  of  this  Credit  Union 
in  good  standing. 

Section  2.  No  officer  or  member  of  the  Board  of  Directors  or  of 
the  Credit  Committee  or  of  the  Supervisory  Committee  shall  either 
borrow  directly  or  indirectly  or  become  surety  for  any  loan  from  this 
Credit  Union,  unless  such  loan  shall  have  been  approved  at  a  regularly 
called  meeting  of  the  members  by  a  two-thirds  vote  of  those  present,  and 
the  notice  of  such  meeting  shall  have  stated  that  the  question  of  loans  to 
directors,  officers,  or  members  of  Committees  would  be  considered  at 
such  meeting. 

Section  3.  No  loan  in  excess  of  $50  shall  be  made  by  this  Credit 
Union  unless  security  therefor  is  taken.  The  term  "security"  shall  in- 
clude an  endorsed  note. 

Section  4.  From  each  borrowing  member  the  Credit  Union  shall 
require  a  surrender  and  pledge  of  the  Certificate  of  Shares*  issued  by 
it  to  the  member  to  whom  such  loan  is  made. 

Section  5.  Loans  shall  be  granted  only  for  productive  purposes 
or  urgent  needs. 

Section  6.  The  amount  of  the  loan,  the  time  for  which  it  is  granted, 
the  terms  of  its  repayment  and  the  form  and  value  of  the  security  shall 
be  fixed  by  the  Credit  Committee. 

Section  7.  The  rate  of  interest  charged  upon  loans  shall  be  fixed 
by  the  Board  of  Directors.  In  no  event  shall  the  interest  rate  exceed 
one  per  centum  per  month. 

Section  8.  All  loans  shall  be  secured  by  the  promissory  note  of 
the  borrower  endorsed  by  one  or  more  responsible  endorsers.  The  Credit 
Committee   may   demand   such   additional   security   as   it   deems   proper. 


*As  has  been  stated  above  these  By-Laws  are  so  drawn  as  to  conform  to  the 
New  York  Credit  Union  Law.  The  issuance  of  a  Certificate  of  Shares  and 
its  surrender  by  a  borrowing  member  appears  to  be  an  unnecessary  requirement 
and  persons  organizing  Credit  Unions  in  other  states  are  advised  not  to  include 
this  provision  in  the  By-Laws. 


44 

Section  9.  Applications  for  loans  shall  state  specifically  the  purpose 
for  which  the  money  is  borrowed,  and  that  no  consideration  has  passed 
or  will  pass  from  the  borrower  to  the  endorser  for  their  endorsement. 
In  case  the  facts  as  stated  in  the  apphcation  are  not  found  to  be  as 
represented,  or  the  money  borrowed  has  been  used  for  purposes  other 
than  those    for  which  it  was  granted,  or  if  the  borrower*- 


the  loan  shall  immediately  become  due  and  payable.  In  the  event  that 
the  Board  of  Directors  shall  deem  any  loan  not  safe  for  any  reason  what- 
soever, additional  security  or  immediate  repayment  of  the  loan  may  be 
demanded. 

Section  10.  No  loan  shall  be  granted  except  with  the  unanimous 
approval  of  the  members  of  the  Credit  Committee  present  when  the 
same  is  considered,  who  shall  constitute  at  least  a  majority  of  said  Com- 
mittee, nor  if  any  member  of  said  Committee  shall  disapprove  thereof. 

Section  11.  Appeals  from  the  decisions  of  the  Credit  Committee 
may  be  taken  to  the  Board  of  Directors,  who  may  lay  the  matter  before 
the  shareholders. 

ARTICLE  XVI 

Pass  Book. 

Section  1.  Each  member  shall  receive  a  pass  book  in  which  shall 
be  entered  all  moneys  paid  by  him  to  the  Credit  Union  on  account  of 
shares,  deposits  and  loans,  all  moneys  withdrawn  by  him  and  other  debits 
and  credits  in  connection  with  his  account  with  the  Credit  Union. 
Each  entry  in  such  pass  book  shall  be  initialed  by  the  Treasurer  or 
other  person  receiving  or  paying  out  the  money  represented  thereby.  If 
a  pass  book  is  lost  or  stolen,  the  owner  shall  notify  the  Treasurer  at 
once  and  may  obtain  a  duplicate  pass  book  upon  establishing  his  owner- 
ship and  paying  a  fee  of  $0.25.  In  all  cases  a  payment  by  the  Treasurer 
upon  presentation  of  the  pass  book  and  the  member's  Certificate  of 
Shares  shall  be  a  discharge  to  the  Credit  Union  for  the  amount  so  paid. 

ARTICLE  XVII 

Guaranty  Fund. 

Section  1.  After  the  payment  of  organization  expenses,  all  entrance 
fees,  fines  and  transfer  fees  shall  be  known  as  reserve  income  and 
shall  be  added  at  once  to  the  guaranty  fund  of  this  Credit  Union. 

Section  2.  At  the  close  of  each  fiscal  year  there  shall  be  set  apart 
as  a  guaranty  fund  25%  of  the  net  earnings  which  have  accumulated 


*In  the  case  of  an  urban  Credit  Union,  these  blanks  should  be  filled  out  to 
provide  for  the  contingency  of  the  borrower's  severing  his  connection  with  the 
employment,  the  fraternal,  labor  or  religious  organization  or  whatever  the  basic 
unit  of  the  Credit  Union  may  be,  and  in  the  case  of  a  rural  Credit  Union,  to  provide 
for  the  contingency  of  the  borrower's  disposing  of  his  personal  property  or  his  farm 
or  ceasing  to  reside  thereon. 


45 

during  the  fiscal  year.  Upon  recommendation  of  the  Board  of  Directors, 
the  members  at  an  annual  meeting  may  increase,  and  whenever  such 
guaranty  fund  equals  the  amount  of  capital,  may  decrease,  the  proportion 
of  net  earnings  which  is  to  be  set  apart  as  a  guaranty  fund.  The 
guaranty  fund  shall  not,  however,  exceed  the  capital  plus  50%  of  the 
other  liabilities  of  this  Credit  Union. 

Section  3.  Losses  incurred  by  this  Credit  Union  shall  be  charged 
to  the  guaranty  fund.  Any  sums  recovered  on  items  previously  charged 
to  it  shall  be  credited  to  such  fund. 

Section  4.  The  guaranty  fund  shall  be  the  property  of  this  Credit 
Union  and  shall  be  held  to  meet  contingent  losses  and  no  share  therein 
may  be  claimed  by  any  member  except  upon  dissolution  in  the  manner 
provided  by  statute  and  Article  XXI  of  these  By-laws. 

ARTICLE  XVIII 

Dividends. 

Section  1.  Dividends  may  be  declared  by  the  Board  of  Directors 
at  their  annual  meeting  immediately  following  the  annual  meeting  of 
members,  out  of  the  undivided  profits  of  this  Credit  Union.  Undivided 
profits  are  to  be  arrived  at  by  crediting  to  the  profit  and  loss  account, 
earnings  from  all  sources,  and  charging  against  such  account  all  expenses 
paid  or  incurred,  interest  paid  or  accrued  and  unpaid  on  debts  owing 
by  the  Credit  Union,  and  all  losses  sustained  by  it  in  excess  of  its 
guaranty  fund.  The  credit  balance  of  the  profit  and  loss  account  as 
thus  determined  shall  constitute  the  undivided  profits  at  the  close  of 
such  period  and  shall  be  applicable  to  the  payment  of  dividends.  But 
no  dividends  shall  be  declared  or  paid  by  this  Credit  Union  until  it 
shall  have  made  good  any  existing  impairment  of  its  capital  and  carried 
to  its  guaranty  fund  such  part  of  its  net  earnings  as  is  required  by 
Article  XVII,  Section  2  of  these  By-Laws. 

Section  2.  Dividends  shall  be  paid  only  on  fully  paid  shares.  Shares 
which  become  fully  paid  during  the  year  shall  be  entitled  to  a  pro- 
portionate part  of  said  dividend  calculated  from  the  first  day  of  the 
iponth  following  such  payment  in  full.  Dividends  may  be  credited  or 
paid  in  cash  at  the  option  of  the  shareholder  within  30  days  after 
declaration  or  as  soon  thereafter  as  funds  therefor  shall  become  available. 

ARTICLE  XIX 

Liability. 

Members  shall  be  equally  and  ratably  liable  for  the  payment  of  the 
debts  of  this  Credit  Union  but  no  member  shall  be  Hable  for  an  amount 
in  excess  of  the  par  value  of  the  shares  which  he  owns  or  for  which 
he  has  subscribed. 


46 

ARTICLE  XX. 

Amendments  to  By-Laws. 

These  By-Laws  may  be  amended  by  a  three-fourths  vote  of  the  mem- 
bers present  at  any  meeting;  provided  the  proposed  amendment  shall  have 
first  had  the  approval  of  the  Superintendent  of  Banks  and  that  notice 
of  such  meeting  containing  a  true  copy  of  the  proposed  amendment  shall 
have  been  given  to  each  member  as  prescribed  in  Section  1  of  Article  IV 
of  these  By-Laws. 

ARTICLE  XXI. 

Dissolution. 

Section  1.  At  any  meeting  specially  called  to  consider  the  subject, 
four-fifths  of  the  members  of  the  Credit  Union,  upon  the  unanimous 
recommendation  of  the  Board  of  Directors,  may  in  person  consent  that 
the  Credit  Union  shall  be  dissolved  and  shall  signify  such  consent  in 
writing.  The  Credit  Union  shall  then  be  dissolved  in  accordance  with 
the  statute  under  which  it  was  organized. 

Section  2.  In  the  event  of  liquidation,  distribution  of  the  assets 
of  the  Credit  Union  shall  be  made  in  the  following  order: 

a.  Repayment  of  money  borrowed,  including  accrued  interest. 

b.  Payment  of  other  legal  obligations  to  non-members. 

c.  Payment  of  deposits  including  accrued  interest. 

d.  Pro  rata  apportionment  of  the  balance  among  the  shareholders. 


47 

b.     Directors'  Minute  Book. 

The  Directors'  minute  book  should  be  in  the  custody  of 
the  Secretary  and  should  contain  a  permanent  record  of  the 
proceedings  of  all  meetings  of  the  Directors. 

FORM  OF  MINUTES  OF 
MEETING  OF  DIRECTORS. 

,  191-... 

The  meeting  of  the  Board  of  Directors  of  the 


Credit    Union   was   held    on   ,    191 —   at 

o'clock  P.  M.,  at  -..-,  - 


The  following  were  present: 


(Insert  in  full  the  names  of  all  present) 
The  meeting  was  called  to  order  by 


It  was  voted  that  should  serve  as  Chairman 

of  the  meeting  and  that  should  serve  as  Secretary. 

Thereupon,  the  following  officers  were  regularly  elected  to  serve 
until  the  next  annual  meeting  of  directors. 

President. 

Vice-President. 

-•• Secretary. 

Treasurer. 


It  was  voted  that  the  surety  bond  of  the  Treasurer  should  be  fixed 

at  $2,000. 

It  was  voted  that  each  member  who  is  delinquent  in  the  payment 

of  instalments  upon   his   shares  shall   pay  a  fine  of  ^  per 

share  for  each  week  during  which  such  delinquency  continues. 

On  motion  it  was  voted  to  elect  the  following  persons  to  member- 
ship in  the  Credit  Union,  each  having  been  regularly  proposed  and 
seconded,  and  each  having  subscribed  for  at  least  one  share. 

Name  Proposed  by  Seconded  by 


On  motion  duly  made  and  seconded  it  was  voted  that  the  Credit 

Union  shall  pay  interest  at  the  rate  of  - - ~ per  annum 

upon  all  savings  deposits  made  by  its  members.     It  was  voted  that  the 
rate  of  interest  upon  loans  made  to  members  shall  be 


Secretary. 


48 

c.     Minute  Book  of  the  Credit  Committee. 

The  minute  book  of  the  Credit  Committee  should  be  kept 
in  the  custody  of  the  Chairman  of  the  Committee  who  also 
acts  as  Secretary,  and  should  contain  a  permanent  record  of 
the  proceedings  of  all  meetings  of  the  Committee. 


FORM  OF  MINUTES 
OF  MEETING  OF  CREDIT  COMMITTEE. 

, 191. 


A  meeting  of  the  Credit   Committee  of  the 


Credit  Union  was  held  on  ,  191 —  at 

o'clock  P.  M.  at , 


The  following  were  present: 


was  elected  permanent 


Qiairman   of  the  Committee. 


The  Committee  then  proceeded  to  consider  applications  for  loans. 
The  following  applications  were  granted,  having  received  the  unanimous 
vote  of  all  the  members  present. 

,  $50.00,   secured  by  his  note,  endorsed  by 

~ — — ,   payable   


with  interest  at %. 


$150.00,   secured  by  his  note,   endorsed  by 
,  payable 


with  interest  at- 


The  application  of  for  a  loan  of 

$200.00  was  deferred  until  applicant  furnishes  endorsers  satisfactory  to 
the  Committee.  The  application  of  -•■ was  re- 
jected on  the  ground  of  

On  motion,  the  Committee  adjourned  to  meet  again  in  one  week. 


Chairman. 


49 

d.     Minute  Book  of  the  Supervisory  Committee. 

The  minute  book  of  the  Supervisory  Committee  should 
be  in  the  custody  of  the  Chairman  of  that  Committee  who  also 
acts  as  Secretary.  It  should  serve  as  a  permanent  record 
of  all  the  proceedings  of  the  Committee. 


FORM  OF  MINUTES  OF  MEETING 
OF  THE  SUPERVISORY  COMMITTEE. 

.  191. 


A  meeting  of  the  Supervisory  Committee  of  the 


Credit  Union  was  held  on ,  191 —  at 

o'clock    P.     M..    at    the    residence    of    ~ 


The  following  were  present: 


was  elected  permanent  Chairman  of  the 

Committee. 

It  was  voted  that  a  meeting  of  the  Supervisory  Committee  should  be 

held  during  the  - week  of  191 —  for  the  purpose 

of  auditing  the  books  of  the  Credit  Union. 

On  motion,  the  Committee  adjourned. 


Chairman. 

DETAILS  OF  OPERATION. 

A  Credit  Union  receives  cash  and  pays  out  cash.  The 
Receipts  consist  of  proceeds  from  shares,  deposits,  interest 
and  payments  on  loans,  fees,  money  borrowed,  etc.  The  Dis- 
bursements consist  of  shares  redeemed,  dividends  paid,  de- 
posits withdrawn,  loans  made,  interest  paid  on  deposits  and  upon 
borrowed  money,  borrowed  money  repaid,  and  expenses. 

7.    THE  PASS  BOOK. 

The  Pass  Book  is  intended  to  provide  each  member  with 
an  individual  record  of  his  transactions  with  the  Credit  Union. 
In  it  should  be  entered  all  moneys  received  from  or  paid  to 
the  member.  It  should  be  of  convenient  size  for  mailing"  and 
pocket  use  and  should  contain  about  20  pages  printed  som-ewhat 
like  the  pages  of  the  individual  ledger.  The  By-Laws  should  be 
printed  at  the  end  of  the  Pass  Book  for  ready  reference. 


50 

Pass  Books  should  be  retained  by  members  and  be 
presented  whenever  money  is  paid  in  or  withdrawn  accom- 
panied by  the  Certificate  of  Shares* 

As  a  safeguard  against  loss  and  to  insure  its  possession 
when  a  borrower  desires  to  make  a  withdrawal  of  funds  from 
the  Credit  Union,  the  Certificate  of  Shares  should  always 
be  kept  in  a  pocket  provided  on  the  inside  of  the  back  cover 
of  the  Pass  Book. 

On  the  outside  cover  of  the  Pass  Book  should  be  printed  the 
following : 

- ~ - — - Credit  Union 


PASS  BOOK 

of 

(Owner's  name) 

Transferable  only  to  qualified  members. 


Upon  the  inside  of  the  front  cover  of  the  Pass  Book,  the 
following  directions  should  be  printed: 

This  Pass  Book  shows  the  condition  of  your  account  with  the  Credit 
Union.     Take  good   care  of  it. 

Bring  the  Pass  Book  with  you  whenever  you  desire  to  pay  in  or  with- 
draw money,  and  always  keep  your  Certificate  of  Shares  in  the  pocket  of 
the  Pass  Book. 

When  you  pay  in  money  make  out  a  Deposit  Slip.  See  to  it  that 
the  entries  in  your  Pass  Book  correspond  with  those  on  the  Deposit  Slip. 

The  Pass  Book  is  to  be  presented  to  the  Treasurer  at  least  once 
every  three  months  for  balancing.  It  should  be  presented  for  inspection 
when  called  for. 

Upon  discontinuance  of  your  membership  and  settlement  of  your 
account,  the  Pass  Book  should  be  surrendered  to  the  Treasurer. 


'Ordinarily  the  Pass  Book  should  be  the  badge  of  membership  and  payments 
should  be  made  by  the  Treasurer  upon  its  presentation.  The  New  York  Law 
however,  requires  borrowing  members  to  "surrender  and  pledge"  to  the  Credit 
Union  "evidences  of  membership"  issued  by  it.  For  this  reason  we  have  suggested 
above  a  Certificate  of  Shares  which,  instead  of  the  Pass  Book,  may  be 
surrendered  by  borrowing  members,  and  retained  by  the  Treasurer  until  the  loans 
have  been  repaid.  A  borrowing  member  who  is  not  the  owner  of  a  fully-paid  share 
must  surrender  his  Pass  Book  until  the  loan  has  been  repaid  or  until  such  time 
as   he   becomes  the   owner   of   a   share   and   receives   a   Certificate   of   Shares. 


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51 


52 


8.     DEPOSIT  SLIP. 


When  money  is  paid  in  by  a  member  on  loans,  shares, 
deposits  or  otherwise,  the  Pass  Book  should  be  accompanied 
by  a  Deposit  Slip  properly  itemized,  which  should  be  retained 
by  the  Treasurer  as  a  part  of  his  permanent  records. 


FORM   OF   DEPOSIT   SLIP. 


Deposited 

in 
TREniT  TTNTON 

BY 

191 

Omit  all  dollar  marks 

Dollars 

Cents 

Shares  

Deposits    

Loans   ~- - 

Int.  on  loans- — 

Fees  and  fines 

Total 

9.     CHECK  BOOK. 


Money  disbursed  by  a  Credit  Union  should  be  by  check 
drawn  upon  the  bank  selected  as  depository.  The  purposes 
for  which  the  check  is  drawn  should  be  itemized  in  the  follow- 
ing manner  on  the  stub  from  which  the  check  is  detached: 


53 


Deposits  withdrawn 

Interest    No.    

Shares   withdrawn 

Dividend  No.  

Loan  No — 


The  use  of  a  rubber  stamp  as  above  is  of  assistance  in 
itemizing  the  check  on  the  accompanying  stub. 

The  Treasurer  should  draw  no  checks  without  authoriza- 
tion. Each  check  should  be  signed  and  countersigned  as  pro- 
vided in  the  By-Laws. 

FORM  OF  CHECK. 


.2  53 


U 


No New  York  191 

Bank  of  — 

Pay  to  ~ or  order 

_ — . _ Dollars 

Credit  Union 

$ —  Treasurer. 


10.     BANK  BOOK. 

Immediately  after  the  final  organization  meeting  the 
Credit  Union  should  select  a  bank  as  depository  for  its  funds. 
Where  the  law  gives  preference  in  state  institutions  to  Credit 
Union  deposits,  a  state  bank  or  trust  company  should  be 
selected  in  preference  to  a  national  bank.  All  moneys  re- 
ceived by  the  Treasurer  should  be  deposited  as  soon  as  possi- 
ble in  the  bank  selected. 

On  the  last  day  of  each  month  the  Treasurer  should  de- 
posit all  money  on  hand  and  leave  the  bank  book  to  be 
balanced. 

11.     LOAN  APPLICATION. 

The  upper  part  of  the  application  for  a  loan  should  be 
filled  out  by  or  for  the  applicant  and  signed  by  him.  The 
lower  part  should  be  filled  out  and  signed  by  the  Credit 
Committee. 


54 

The  Credit  Committee  should  record  in  its  minute  book 
every  appHcation  approved  or  rejected. 

Every  granted  application  should  be  given  a  number.  The 
same  number  should  also  be  given  to  the  loan  to  identify  it 
through  all  its  stages. 

The  Credit  Committee's  approval  of  an  application  is  the 
sole  authority  for  the  Treasurer's  drawing  a  check  for  a  loan. 
The  application  should  be  kept  by  the  Treasurer  among  his 
permanent  records. 

FORM  OF  APPLICATION  FOR  LOAN. 

Loan  No. 


THE  -.- CREDIT  UNION. 

Date 


I  hereby  make  application  for  a  loan  of 
($ )   for  the  purpose  of 


to  be  repaid  as  follows 


to  be  secured  by  my  promissory  note  endorsed  by: 

Name  Address  

Name  Address  


I  hereby  certify  that  all  the  statements  made  by  me  in  connection 
with  this  application  are  true. 

Signature     


Address- 


er© be  filled  out  by  credit  committee  upon  the  granting  of  loan) 

Amount  Granted  $ 

Purpose   — 

Security    - 

Endorsers    - -- 


Terms     - 
Remarks 


The  treasurer  is  hereby  authorized  to  draw  a  check  for  the  amount 
of  this  loan  to  the  order  of  the  above  named  member  upon  his  presenta- 
tion of  the  required  security  and  the  surrender  of  his  Certificate  of  Shares. 


Credit  Committee  - 


55 
12.     PROMISSORY  NOTE. 

The  note  should  be  signed  in  full  by  the  maker  and  the 
endorsers  in  the  presence  of  the  Treasurer.  It  should  be 
given  a  number  corresponding  to  the  number  of  the  loan. 


FORM  OF  NOTE. 

Loan  No -..  -- — 191 

(Place  and  Date) 

For  Value  Received,  we,  • 

as  principal,  and and 

- -as   sureties,   promise    to  pay  to  the  order  of 

THE CREDIT  UNION  at 

the  sum  of — payable  as  follows : 


with  interest  at  the  rate  of ~%  per  month  on  monthly  balances 

payable   

It  is  understood  and  agreed  that,  in  default  of  pa3rment  of  any  in- 
stalment on  this  note  or  in  the  event  that  the  money  borrowed  on  this 
note  is  not  used  for  the  purposes  set  forth  in  the  application,  or  in  case 
the  Credit  Union  shall  deem  the  security  thereof  unsafe  for  any  reason 
whatsoever,  then  this  note  or  so  much  thereof  as  may  remain  unpaid 
shall  immediately  become  due  and  payable. 

It  is  further  understood  and  agreed  that  in  default  of  payment  of  any 
instalment  on  this  note,  the  Credit  Union  may  apply  to  its  payment  such 
amounts  as  have  been  paid  by  the  principal  upon  shares  as  represented 
by  the  Certificate  of  Shares  surrendered  and  pledged  as  collateral  se- 
curity hereon. 


56 
13.    TICKLER. 

The  Tickler  is  a  book  in  which  due  and  maturity  dates  of 
notes  and  dates  of  instalment  payments  upon  shares  are 
entered.  It  enables  the  Treasurer  to  keep  in  intimate  touch 
with  the  condition  of  each  member's  account.  An  ordinary 
commercial  diary  will  answer  the  purpose. 

14.     INTEREST  TABLE. 

The  interest  table  given  below  is  constructed  on  the  basis 
of  one  per  cent,  per  annum. 

To  compute  the  interest  on  a  given  sum  for  a  given  time, 
find  the  amount  in  the  first  left-hand  column  of  the  table,  then 
proceed  to  the  right,  until  the  column  headed  by  the  number 
of  months  desired  is  reached.  The  figures  in  that  square  give 
the  amount  of  interest  at  the  rate  of  one  per  cent,  per  annum. 
By  multiplying  that  amount  by  the  rate  of  interest  to  be 
charged  or  paid  the  correct  amount  is  obtained. 

It  will  be  observed  that  the  amounts  run  in  multiples  of 
$5.  If  the  amount  upon  which  interest  is  to  be  computed  is 
not  a  multiple  of  five,  $32.  for  example,  it  is  necessary  first 
to  compute  the  interest  on  $30.,  then  the  interest  on  $2.,  and 
multiply  the  sum  by  the  rate  of  interest  to  be  paid  or  charged. 

In  computing  interest  on  loans  repaid  in  monthly  instal- 
ments, interest  for  a  full  month  should  be  charged  for  any 
portion  of  a  month  and  interest  on  a  dollar  should  be  charged 
on  any  fraction  of  a  dollar. 

When  loans  are  repaid  in  weekly  or  semi-monthly  instal- 
ments, interest  should  be  computed  and  paid  at  the  end  of 
each  calendar  month  upon  the  balance  due  at  the  beginning 
of  that  month. 

In  computing  interest  on  deposits,  interest  should  be 
allowed  only  for  full  calendar  months  and  no  interest  should 
be  allowed  for  a  fraction  of  a  calendar  month,  nor  for  a  frac- 
tion of  a  dollar. 


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58 
15.     CASH  BOOK. 

The  cash  book  is  the  principal  book  of  account  of  a  Credit 
Union.  It  is  divided  into  two  main  divisions — Cash  Received 
and  Cash  Disbursed.  Receipts  are  entered  upon  the  left- 
hand  or  even  numbered  pages,  and  Disbursements  are  entered 
upon  the  right-hand  or  odd  numbered  pages.  Each  page  is 
divided  into  columns  headed  by  the  items  for  which  money  was 
received  or  paid  out. 

To  make  a  receipt  entry  in  the  Cash  Book,  there  should 
first  be  put  down,  on  the  left  hand  page,  the  date  and  the  name 
of  the  person  from  whom  the  money  was  received  and  the 
total  amount  entered  in  the  column  'Total  Receipts."  Then 
the  items  of  the  total  amount  as  they  appear  on  the  accom- 
panying Deposit  Slip  should  be  entered  in  their  proper  columns. 

To  make  a  disbursement  entry  in  the  Cash  Book,  there 
should  first  be  put  down,  on  the  right-hand  page,  the  date  and 
the  name  of  the  person  to  whom  the  money  was  paid  and  the 
total  amount  in  column  "Total  Disbursements."  Then  the  items 
of  the  total  amount  as  they  appear  on  the  stub  of  the  check  book 
should  be  entered  in  their  respective  columns. 

Receipts  and  Disbursements  shown  by  Deposit  Slips  and 
check  stubs  need  not  be  entered  in  the  Cash  Book  at  the  time 
of  the  transactions,  but  should  be  entered  at  some  time  during 
the  day  on  which  the  transactions  occurred. 

When  a  page  is  filled,  the  columns  should  be  footed  up 
and  the  footings  carried  forward  to  the  succeeding  receipt  or 
disbursement  page,  as  the  case  may  be.  Entries  should  then 
be  continued  as  before. 

On  the  last  day  of  each  month  all  entries  for  the  month 
should  be  footed  up  regardless  of  whether  the  page  is  filled  or 
not,  and  the  following  month's  entries  begun  on  a  new  page. 

The  difference  between  the  total  Receipts  and  total  Dis- 
bursements for  the  month  plus  checks  drawn  but  not  cashed 
should  equal  the  balance  of  cash  on  hand  and  in  bank.  If  it 
does  not,  there  is  an  error  in  the  cash  and  steps  should  be  taken 
at  once  to  trace  and  correct  it. 


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16.     LEDGERS. 

The  books  in  which  all  transactions  recorded  in  the  Cash 
Book  are  assembled  and  classified  are  called  the  Ledgers,  the 
classifications  are  called  Accounts,  and  their  transfer  from  the 
Cash  Book  to  the  Ledger  is  called  Posting. 

INDIVIDUAL  LEDGER. 

The  Individual  Ledger  contains  the  accounts  which  relate 
to  transactions  with  members  or  other  persons  with  whom  the 
Credit  Union  may  have  dealings.  These  are  known  as  In- 
dividual Accounts,  Their  number  is  therefore  unlimited.  The 
Individual  Ledger  should  contain  an  alphabetical  tab  index  at  the 
beginning  and  each  account,  when  posted,  should  be  immediately 
indexed  under  the  proper  letter. 

GENERAL  LEDGER. 

The  General  Ledger  contains  the  accounts  which  relate 
solely  to  the  condition  of  the  Credit  Union,  without  reference 
to  the  persons  with  whom  the  Credit  Union  deals.  These  are 
called  General  Accounts.    They  are : 

1.  Cash — received  and  paid  out. 

2.  Shares — redeemed  and  issued. 

3.  Deposits — withdrawn  and  received. 

4.  Accounts  Payable — Obligations  paid  and  obligations 
incurred  (money  borrowed). 

5.  Accounts  Receivable — Loans  made  to  members  and 
repaid  by  them. 

6.  Interest — Paid  and  received. 

7.  Investments — Money  in  savings  banks  and  other  legal 
investments. 

8.  Expenses — Expenses  for  whatever  purpose. 

9.  Profit    and    Loss — Net    interest    less    expenses    and 
losses. 

10.  Guaranty  Fund — Reserve  Income  plus  percentage  set 
aside  from  net  profits  to  the  Guaranty  Fund. 

11.  Dividends — Declared  and  paid. 

12.  Surplus — Balance  of  Profits  not  put  in  Guaranty  Fund 
and  not  distributed  in  Dividends. 


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(GENERAL    LEDGER)                                        CASH 

Date 

Item 

C/B 

Page 

Received 

Date 

Item 

C/B 
Page 

Paid 
Out 

Mo. 

Dy. 

Mo. 

Dy. 

Ca  rried  forwa  rd. 

Carried  forward, 

SHARES 

Date 

Item 

C/B 
Page 

REDEEMED          | 

Date 

Item 

C/B 
Page 

ISSUED              1 

Number 

Amount 

Isuiuber 

Amount 

Mo. 

Dy. 

Full 
Paid 

Part 
Paid 

Mo. 

Dy. 

Sub 
sori'd 

Full 
Paid 

Carried  fivd.. 

Carried  fzvd.. 

DEPOSITS 

Date 

Item 

C/B 
Page 

With- 
drawn 

Date 

Item 

C/B 
Page 

Received 

Mo. 

Dy. 

Mo. 

Dy. 

Carried  forward^ 

Carried  forward. 

ACCOUNTS  PAYABLE 

Date 

Item 

C/B 
Page 

Paid 

Date 

Item 

C/B 
Page 

Incurred 

Mo. 

Dy. 

Mo. 

Dy. 

Carried  forwardf 

A 

3 

Carried  forward. 

(c.«.B*.  .„CE«)        ^Q^^g  RECEIVABLE 

Date 

Item 

C/B 
Page 

Made 

Date 

Item 

C/B 
Page 

Repaid 

Mo. 

Dy. 

Amount 

Mo. 

Dy. 

Amount 

Carried  forward. 

Carried  forward. 

INTEREST 

Date 

Item 

C/B 
Page 

Paid 

Date 

Item 

C/B 
Page 

Received 

Mo. 

Dy. 

No. 

Amount 

Mo. 

Dy. 

Amount 

Carried  fivd.. 

1 

Carried  forward. 

INVESTMENTS 

Date 

Item 

C/B 
Page 

Made 

Date 

Item 

C/B 
Page 

Liqui- 
dated 

Mo. 

Dy. 

Mo. 

Dy. 

Carried  forward. 

Carried  forward. 

EXPENSES 

Date 

Item 

C/B 
Page 

Paid 

Date 

Item 

C/B 
Page 

Receipts 

Mo. 

Dy. 

Mo. 

Dy. 

Carried  forward. 

6 

4 

Carried  forward. 

1 

ERRATA 


(GENERAL    LEDGER) 

PROFIT  &  LOSS 

1 

Date 

Item 

Led. 
Page 

Net 
Interest 

Date 

Item 

Led. 
Page 

Deduc- 
tions 

Mo. 

Dy 

Mo. 

Dy. 

Carried  fo  rwa  rd. 

Carried  forward. 

GUARANTY  FUND 

Date 

Item 

Led. 
Page 

Putin 

Date 

Item 

Led. 
Page 

Taken 
Out 

Mo. 

Dy. 

Mo. 

Dy. 

Carried forzvard. 



Carried  forward. 

DIVIDEND 

Date 

Item 

Led. 
Page 

Declared 

Date 

Item 

Led 
Page 

Paid         1 

Mo. 

Dy. 

No 

Amount 

Mo. 

Dy. 

No 

Amount  | 

Carried fvjd. , 

Carried  fivd. , 

SURPLUS 

Date 

Item 

Led. 
Page 

Put  In 

Date 

Item 

Led. 
Page 

Taken 
Out 

Mo. 

Dy. 

Mo. 

Dy. 

Carried  forward. 

^ 

5 

Carried  forward. 

66 


POSTING. 


As  the  first  eight  General  Accounts  of  the  General  Ledger 
represent  cash  transactions;  namely,  cash  received  and  cash 
paid  out,  all  that  is  needed  in  posting  is  to  transfer  at  the  end 
of  the  month  the  footings  from  the  Cash  Book  to  their  proper 
accounts.  These  accounts  should  be  posted  once  a  month,  as 
of  the  last  day  of  the  month.  The  Ledger  page  should  be  noted 
in  the   Cash  Book  underneath  the  amount   transferred,   thus — 

L.  P In  the  same  manner  the  Cash  Book  page  should 

be  noted  in  the  Ledger  column  provided  opposite  the  item  posted. 
These  notations  are  important  as  they  indicate  that  the  items 
have  been  posted.  When  these  notations  are  absent,  the  pre- 
sumption is  that  the  items  have  not  been  posted. 

The  last  four  General  Accounts  do  not  represent  cash  trans- 
actions (except  the  Reserve  Income)  but  consist  of  transfers 
from  the  other  General  Accounts,  and  cannot  therefore  be 
posted  until  the  other  accounts  are  posted. 

Posting  into  the  Individual  Accounts  should  be  done  as 
soon  as  possible  after  the  entry  is  made  in  the  Cash  Book  so 
that  these  accounts  may  alw^ays  be  up-to-date.  At  the  time 
of  posting  the  Ledger  page  of  each  item  should  be  noted  in 
the  Cash  Book  and  the  Cash  Book  page  noted  in  the  Ledger. 

If  the  posting  is  properly  done,  the  sum  of  the  credits  of 
the  General  Accounts  and  the  sum  of  the  debits  of  the  General 
Accounts  will  equal.  The  footing  up  of  the  General  Accounts 
is  called  taking  a  Trial  Balance  and  proves  the  correctness  of 
the  entries.  If  the  Trial  Balance  is  found  correct,  a  balance 
sheet,  a  statement  of  assets  and  liabilities,  or  any  other  financial 
statement,  can  safely  be  drawn  from  the  Ledger. 


67 


THE.. 


17.     STATEMENT 

OF 
CREDIT  UNION. 


(organized. 


for  the  period  from 19. 


.to. 


.19. 


CONDENSED  STATEMENT  OF  TRANSACTIONS 


19. 


Number 


Amount 


19. 


Number       Amount 


Increase 
Decrease 


Number 


Increase 
Decrease 


Amount 


Members 

Shares  subscribed 
Shares  paid 
Loans  made 
Loans  repaid 
Deposits 
Interest  earned 
Interest  collected 


CONDENSED  BALANCE  SHEET 


ASSETS 


LIABILITIES 


Cash 

Loans  receivable 

Investments 

Interest   on   loans,   due 

and  accrued 
Interest  on  balances 

in  bank,  accrued 


Shares 
Deposits 
Loans  payable 
Surplus,  Jan.  19. 
Reserve  Fund 


Surplus  for  year 


CONDENSED  INCOME  ACCOUNT 


EARNINGS 


EXPENDITURES 


19., 


19. 


Interest  on  loans 
Interest  on  balances 
in  banks 


Interests  on  deposits 
Interests  on  loans 
Operatins:  expense 
Losses 

To  reserve  fund 
Dividends 
Surplus  for  year 


Treasurer. 


This  is  to  certify  that  we  have  on. 


191 

•examined  the  books 


of  account,  notes  and  other  securities,  vouchers,  etc.,  of  the- 
Credit  Union  and  find  the  above  statement  to  be  correct. 


Supervisory 
Committee. 


68 

NEW  YORK  CREDIT  UNION  LAW. 

(Article  XI,  Chap.  369,  Laws  of  1914.) 

Section  450.  Incorporation;  organization  certificate. 

451.  Proposed   by-laws. 

452.  When    corporate   existence   begins;   conditions   precedent   to 

commencing  business. 

453.  General  powers. 

454.  Limitations  upon  powers. 

455.  Capital. 

456.  Deposit  of  funds;  preference. 

457.  Guaranty  fund. 

458.  Calculation   of   earnings. 

459.  Dividends. 

460.  Change  of  location. 

461.  Exemptions   and   liability  of   shareholders. 

462.  Reduction  of  liability  to  shareholders. 

463.  Withdrawal  and  expulsion  of  members. 

464.  Meetings  of  shareholders. 

465.  Qualifications  of  directors. 

466.  Oaths  of  directors,  officers  and  committee  members. 

467.  Tenure  of  office  of  directors. 

468.  Powers  and  duties  of  directors. 

469.  Special   duties  of  directors. 

470.  Credit  committee. 

471.  Supervisory   committee. 

472.  Officers. 

473.  Amendment  of  by-laws. 

474.  Credit  union  not  liable  to  taxation. 

475.  Fiscal  year. 

476.  Communications   from  banking  department. 

477.  Reports  to  superintendent. 

478.  Penalty  for  loans  to  non-members. 

479.  Penalty  for  use  of  term  "Credit  Union." 

§  450.  Incorporation;  organization  certificate. 

When  authorized  by  the  superintendent  of  banks  as  provided  in  sec- 
tion twenty-three  of  this  chapter,*  seven,  or  more  persons  employed  or 


*  S3.     InveBtigation  hy  superintendent  of  proposed  corporation,  private  banker 
or  personal   loan   broker;    refusal   or  approval;    filing:  certificate. 

When  any  such  certificate  shall  have  been  filed  for  examination,  the  super- 
intendent shall  thereupon  ascertain  from  the  best  sources  of  information  at  his 
command,  and  by  such  investigation  as  he  may  deem  necessary,  whether  the 
character,  responsibility  and  general  fitness  of  the  person  or  persons  named  in 
such  certificate  are  such  as  to  command  confidence  and  warrant  belief  that  the 
business  of  the  proposed  corporation,  private  banker  or  personal  loan  broker  will 
be  honestly  and  efficiently  conducted  in  accordance  with  the  intent  and  purpose  of 
this  chapter,  and  whether  the  public  convenience  and  advantage  will  be  promoted 
by  allowing  such  proposed  corporation,  private  banker  or  personal  loan  broker  to 
engage   or  continue   in   business. 

After  the  superintendent  shall  have  satisfied  himself  by  such  investigation 
whether  it  is  expedient  and  desirable  to  permit  such  proposed  corporation,  private 
banker  or  personal  loan  broker  to  engage  or  continue  in  business,  he  shall  within 
sixty  days  after  the  date  of  the  filing  of  such  certificate  for  examination,  endorse 
upon  each  of  the  duplicates  thereof  over  his  official  signature  the  word  "approved" 
or  the  word  "refused,"  with  the  date  of  such  endorsement.  In  case  of  refusal 
he  shall  forthwith  return  one  of  the  duplicates,  so  endorsed,  to  the  proposed  in- 
corporators, private  banker  or  personal  loan  broker  from  whom  such  certificate 
was  received.  In  case  of  approval  he  shall  forthwith  give  notice  thereof  to  the 
proposed  incorporators,  private  banker  or  personal  loan  _  broker  and  file  one  of 
the  duplicate  certificates  in  his  own  office  and  the  other  in  the  office  of  the  clerk 
of  the  county  in  which  is  located  the  place  of  business  of  such  proposed  corpora- 
tion,  private   banker   or    personal   loan  broker. 


69 

residing  in  the  State  of  New  York  may  form  a  corporation  to  be  known 
as  a  credit  union.  Such  persons  shall  subscribe  and  acknowledge  and 
submit  to  the  superintendent  of  banks  at  his  office  an  organization  cer- 
tificate in  duplicate  which  shall  specifically  state: 

1.  The  name  of  the  corporation  which  shall  include  the  words 
"credit  union." 

2.  The  place  where  its  business  is  to  be  transacted.  If  the  condi- 
tion of  membership  is  employment  of  its  members  by  a  certain  individual, 
partnership  or  corporation,  the  place  of  business  of  such  individual, 
partnership  or  corporation  may  be  stated  as  the  place  of  business  of  such 
credit  union. 

3.  The  par  value  of  the  shares,  which  shall  not  exceed  twenty-five 
dollars. 

4.  The  full  name,  residence  and  post  office  address  of  each  of  the 
incorporators  and  the  number  of  shares   subscribed  for  by  each. 

5.  The  term  of  its  existence,  which  may  be  perpetual. 

6.  The  number  of  its  directors  which  shall  not  be  less  than  five, 
and  the  names  and  addresses  of  the  incorporators  who  shall  be  its 
directors  until  the  first  annual  meeting  of  shareholders. 

§  451.  Proposed  by-laws. 

The  incorporators  shall  subscribe  and  acknowledge  and  submit  to 
the  superintendent  of  banks  at  his  office  proposed  by-laws,  in  duplicate, 
which  shall  prescribe  the  manner  in  which  the  business  of  the  credit 
union  shall  be  conducted  with  reference  to  the  following  matters : 

1.  The  purposes  of  the  corporation. 

2.  The  qualifications  for  membership. 

3.  The  date  during  the  month  of  January  of  the  annual  meeting; 
the  manner  of  conducting  meetings;  the  method  by  which  members  shall 
be  notified  of  meetings,  and  the  number  of  members  which  shall  constitute 
a  quorum. 

4.  The  number  of  directors  necessary  to  constitute  a  quorum,  and 
the  compensation  and  duties  of  officers  elected  by  the  directors. 

5.  The  powers  and  duties  of  the  credit  committee  and  the  number 
of  members,  not  less  than  three,  of  which  it  shall  be  composed. 

6.  The  powers  and  duties  of  the  supervisory  committee  and  the 
number  of  members,  not  less  than  three,  of  which  it  shall  be  composed, 

7.  The  conditions  upon  which  shares  may  be  issued,  paid  for,  trans- 
ferred and  withdrawn. 

8.  The  fines,  if  any,  which  shall  be  charged  for  failure  punctually 
to  meet  obligations  to  the  corporation. 

9.  The  conditions  upon  which  deposits  may  be  received  and  with- 
drawn. 

10.  The  manner  in  which  the  funds  of  the  corporation  shall  be 
employed. 

11.  The  conditions  upon  which  loans  may  be  made  and  repaid. 

12.  The  maximum  rate  of  interest  that  may  be  charged  upon  loans. 


70 

13.  The  method  of  receipting  for  money  paid  on  account  of  shares, 
deposits  or  loans. 

14.  The  manner  in  which  the  guaranty  fund  shall  be  accumulated. 

15.  The  manner  in  which  dividends  shall  be  determined  and  paid 
to  members. 

16.  Whether  the  members  shall  be  equally  and  ratably  liable  for 
the  payment  of  the  debts  of  the  corporation, 

§  452.  When    corporate    existence    begins;    conditions    precedent    to 
commencing  business. 

When  the  superintendent  of  banks  shall  have  endorsed  his  approval 
on  the  organization  certificate,  as  provided  by  section  twenty-three  of 
this  chapter,  the  corporate  existence  of  the  credit  union  shall  begin,  and 
it  shall  then  have  power  to  elect  officers  and  to  transact  such  other 
business  as  relates  to  its  organization.  But  it  shall  transact  no  other 
business,  until  the  superintendent  shall  have  duly  issued  to  it  the  authori- 
zation certificate  specified  in  section  twenty-four  of  this  chapter.* 

§  453.  General  powers. 

In  addition  to  the  powers  conferred  by  the  general  corporation  law 
a  credit  union  shall,  subject  to  the  restrictions  and  limitations  contained 
in  this  article  and  in  its  by-laws,  have  the  following  powers : 

1.  To  issue  shares  to  persons  qualified  for  membership. 

2.  To  charge  an  entrance  fee  to  subscribers  for  such  shares. 

3.  To  charge  a  reasonable  fee  for  the  transfer  of  its  shares. 


*  2i.    Authorization    certificate;    when    and    to    whom    issued;    contents;    filing 
and  recording. 

Before  authorizing  any  corporation,  private  banker  or  personal  loan  broker  to 
begin  or  continue  business  the  superintendent  shall  be  satisfied  that  such  corporation, 
banker  or  broker  has  in  good  faith  complied  with  all  the  requirements  of  law 
and  fulfilled  all  the  conditions  precedent  to  commencing  business  imposed  by  this 
chapter.  In  the  case  of  every  stock  corporation,  he  shall  examine  or  cause  an 
examination  to  be  made  in  order  to  ascertain  whether  all  of  its  capital  stock  has 
been  fully  paid  in  cash.  In  the  case  of  every  personal  loan  broker  and  of  every 
private  banker  subject  to  all  the  provisions  of  article  four  of  this  chapter,  he 
shall  examine  or  cause  an  examination  to  be  made  in  order  to  ascertain  whether 
there  has  been  invested  in  such  business,  or  deposited  in  cash  to  be  invested 
therein,  the  amount  of  permanent  capital  stated  in  the  certificate  of  such  banker 
or    broker. 

If  satisfied  that  such  corporation,  banker  or  broker  has  in  good  faith  complied 
with  all  the  requirements  of  law  and  fulfilled  ail  the  conditions  precedent  to  com- 
mencing business  imposed  by  this  chapter,  the  superintendent  shall,  within  six 
months  after  tthe  date  on  which  such  organization  certificate  or  private  banker's 
or  personal  loan  broker's  certificate  was  filed  by  him  for  examination,  but  in  no 
case  after  the  expiration  of  that  period,  issue  under  his  hand  and  official  seal,  in 
triplicate,  an  authorization  certificate  to  the  person  or  persons  named  in  such 
organization  certificate  or  private  banker's  or  personal  loan  broker's  certificate. 
Such  authorization  certificate  shall  state  that  the  corporation,  private  banker  or 
personal  loan  broker  named  therein  has  complied  with  the  provisions  of  this 
chapter  and  with  all  the  requirements  of  law,  that  it  is  authorized  to  transact 
within  this  state  the  business  specified  therein,  and  that  such  business  can  safely  be 
intrusted  to  it.  One  of  the  triplicate  authorization  certificates  shall  be  transmitted 
by  the  superintendent  to  the  corporation,  private  banker  or  personal  loan  broker, 
thereby  authorized  to  commence  or  continue  business,  another  shall  be  filed  in  the 
office  of  the  superintendent,  and  the  third  shall  be  filed  by  the  superintendent  in 
the  county  clerk's  office  wherein  the  organization  certificate  of  such  corporation  _  or 
the  private  banker's  or  personal  loan  broker's  certificate  has  been  filed  by  him. 
The  superintendent  and  said  county  clerk  shall  respectively  attach  such  authoriza- 
tion certificate  to  such  organization  certificate  or  private  banker's  or  personal  loan 
broker's  certificate  previously  filed  in  his  office  and  shall  record  both  such  cer- 
tificates  in   the  book    of    records   of   incorporation   therein. 


to  Sec.  453  (Chapter  294,  Laws  oi  Ly.=>,- 

14    To  invest  any  moneys  received  by  it  and  not 
lent  to  its  members  in  the  securities  which  are  authorized 
as  LvestmenTs  for  savings  banks  by  subdivisions  one 
t4o  Three,  four,  five  and  seven  of  section  two  hundred 
thirty -nine  of  this  chapter.  "* 

_.  -^  .v,..^  xiiKJiicy  Lo  US  members  upon  such  terms  and  conditions 
as  the  by-laws  provide  and  as  the  credit  committee  shall  approve,  at 
rates  not  exceeding  one  per  centum  per  month,  inclusive  of  all  charges 
incident   to   the  making   of   such   loan. 

6.  To  deposit  any  moneys  received  by  it  and  not  lent  to  members, 
as  provided  in  section  four  hundred  and  fifty-six  of  this  article. 

7.  To  borrow  money  to  an  amount  not  exceeding  forty  per  centum 
of  the  capital  of  such  corporation,  except  where  the  capital  is  five 
thousand  dollars  or  less,  in  which  event  such  credit  union  may  borrow 
any  amount  up  to  two  thousand  dollars. 

8.  To  reduce  its  liability  to  shareholders  as  provided  in  section  four 
hundred  and  sixty-two  of  this  article. 

9.  To  fine  members  for  failure  to  meet  punctually  obligations  to 
such  credit  union. 

10.  To  expel  members,  as  provided  in  section  four  hundred  and 
sixty-three  of  this  article. 

11.  To  impress  a  lien  upon  the  shares  and  dividends  of  any  mem- 
ber to  the  extent  of  any  loans  made  to  him  and  for  any  dues  or  fines 
payable  by  him. 

12.  To  cancel  the  shares  of  any  member  who  withdraws  or  is  ex- 
pelled, and  apply  the  withdrawal  value  thereof  to  the  liquidation  of  such 
member's  indebtedness  to  the  corporation. 

13.  To  hold  shares  in  and  make  deposits  with  other  credit  unions. 

§  454.  Limitations   upon   powers. 

No  credit  union  shall: 

1.  Pay  any  commission  or  compensation  for  securing  members  or 
for  the  sale  of  its  shares. 

2.  Make  any  loan  in  excess  of  fifty  dollars  unless  security  therefor 
is  taken.  The  term  "security"  within  the  meaning  of  this  subdivision 
shall    include   an   endorsed   note. 

3.  Impose  a  fine,  in  case  of  failure  of  a  member  to  make  payments 
on  shares,  exceeding  two  per  centum  per  month  or  fraction  of  a  month 
on  amounts  due,  except  that  a  minimum  fine  of  five  cents  per  month 
or  fraction  thereof  may  be  imposed. 

4.  Permit  any  director,  officer  or  member  of  the  credit  committee 
or  supervisory  committee  to  borrow  directly  or  indirectly  or  become 
surety  for  any  loan  or  advance  made  by  the  corporation,  unless  such 
loan  shall  have  been  approved  at  a  regularly  called  meeting  of  the  mem- 
bers of  the  corporation  by  a  majority  vote  of  those  present,  and  the 
notice  of  such  meeting  shall  have  stated  that  the  question  of  loans  to 
directors,  officers  or  members  of  committees  would  be  considered  at  such 
meeting. 

5.  Issue  shares  or  accept  deposits  in  trust,  except  in  the  name  of 
the  trustee,  as  such,  for  a  specified  beneficiary  whose  residence  shall  be 
disclosed  to  the  credit  union  by  such  trustee. 


72 

6.  Issue  any  shares  except  to  those  qualified  for  membership  under 
its  by-laws,  and  unless  there  is  printed  upon  the  certificate  or  other 
evidence  of  such  shares  the  words  "transferable  only  to  qualified  mem- 
bers." 

7.  Lend  to  any  of  its  members  without  requiring  at  the  time  of 
such  loan  a  surrender  and  pledge  of  any  certificates  or  other  evidences 
of  membership,  issued  by  such  credit  union  to  the  member  to  whom 
such  loan   is  to  be  made. 

§  455.  Capital. 

The  capital  of  a  credit  union  shall  consist  of  the  payments  made  by 
members   on   shares,   and   unpaid   dividends   credited   thereon. 

§  456.  Deposit  of  funds;  preference. 

The  capital,  deposits,  undivided  profits  and  guaranty  fund  of  any 
credit  union  may  be  deposited  in  one  or  more  savings  banks,  state  banks  or 
trust  companies,  incorporated  under  the  laws  of  the  State  of  New  York, 
or  in  national  banks  located  in  the  state.  Funds  deposited  in  a  state 
bank  or  trust  company  shall,  in  the  event  of  the  liquidation  of  such 
depositary,  be  entitled  to  priority  of  payment  to  the  same  extent  as 
deposits  of  savings  banks  as  provided  in  section  two  hundred  and 
seventy-eight  of  this  chapter.* 

§  457.  Guaranty  fund;  how  created  and  regulated. 

Every  credit  union  shall  create  a  guaranty  fund  which  shall  in  no 
case  exceed  the  capital  of  the  corporation,  plus  fifty  per  centum  of  its 
other  liabilities,  and  which  shall  be  held  to  meet  contingencies  until  the 
corporation  is  dissolved,  when  it  may  be  distributed  among  the  share- 
holders. 

Such  guaranty  fund  shall  be  created  and  regulated  as  follows : 

1.  All  entrance  fees,  transfer  fees  and  fines  remaining  after  the 
payment  of  organization   expenses   shall  be   set  aside   to   such   fund. 

2.  At  the  close  of  each  fiscal  year  twenty-five  per  centum  of  the 
net  earnings  of  the  corporation  for  the  year  shall  be  carried  to  such 
fund,  provided  that,  upon  the  recommendation  of  the  board  of  directors, 
the  shareholders,  at  the  annual  meeting,  may  increase  or,  if  such  fund 
equals  or  exceeds  its  capital,  may  decrease  the  proportion  of  net  earnings 
to  be  thus  set  aside. 

3.  Any  sums  recovered  on  items  previously  charged  to  it  shall  be 
credited  to  such  fund. 

Losses  incurred  by  a  credit  union  may  be  charged  to  its  guaranty 
fund. 


*  278.     Preference   of   deposits    made   by    savings   bank. 

All  the  property  of  any  bank  or  trust  company  which  shall  become  insolvent, 
shall  be  applied  by  the  trustees,  assignees  or  receivers  thereof,  or  by  the  super- 
intendent of  banks  if  such  insolvent  bank  or  trust  company  is  being  liquidated  by 
him  under  the  provisions  of  section  fifty-seven  of  this  chapter,  in  the  first  place 
ratably  and  proportionately  to  the  payment  in  full  of  any  sum  or  sums  of  money 
deposited  therewith  by  any  savings  bank,  savings  and  loan  association  or  credit 
union,  but  not  to  an  amount  exceeding  that  authorized  to  be  so  deposited  by  the 
provision  of  this  chapter,  and  subject  to  any  other  preference  provided  for  in  the 
charter  of   any  such  bank  or  trust  company. 


73 

§  458.  Calculation  to  determine  whether  dividends  may  be  declared 
and  amount  thereof. 
On  or  after  the  date  of  the  close  of  each  fiscal  year,  in  order  to 
determine  whether  a  dividend  may  be  declared,  and  the  amount  thereof, 
the  earnings  from  all  sources,  may  be  credited  to  the  credit  union's  profit 
and  loss  account  and  the  following  items  shall  be  charged  against  such 
account : 

1.  All  expenses  paid  or  incurred  of  whatever  nature  in  the  man- 
agement of  its  affairs,  the  collection  of  its  debts  or  the  transaction  of 
its  business, 

2.  The  interest  paid,  or  accrued  and  unpaid,  on  debts  owing  by  it. 

3.  All  losses  sustained  by  it  in  excess  of  its  guaranty  fund. 

The  credit  balance  of  the  profit  and  loss  account  as  thus  determined 
shall  constitute  the  undivided  profits  of  the  credit  union  at  the  close 
of  such  period,  and  shall  be  applicable  to  the  payment  of  dividends  ex- 
cept as  provided  in  the  next  succeeding  section. 

§  459.  Dividends   to    shareholders;   how   often   and   from   what   pay- 
able; conditions  precedent. 

The  directors  of  any  credit  union  may,  at  the  close  of  each  fiscal 
year,  declare  such  dividend  from  its  undivided  profits  as  they  shall 
judge  expedient.  But  no  credit  union  shall  declare,  credit  or  pay  any 
dividend  to  its  shareholders  until  it  shall  have: 

1.  Made   good   any   existing  impairment   of  its   capital. 

2.  Carried  to  its  guaranty  fund  such  part  of  its  net  earnings  as  is 
required  by  section  four  hundred  fifty-seven  of  this  article. 

Only  fully  paid  shares  shall  be  entitled  to  dividends,  and  shares 
which  shall  have  been  fully  paid  during  any  year  in  which  dividends 
were  declared  shall  be  entitled  only  to  a  proportionate  part  of  such 
dividends  calculated  from  the  first  day  of  the  month  following  such 
payment  in  full. 

§  460.  Change  of  location. 

Any  credit  union  may  make  a  written  application  to  the  superin- 
tendent of  banks  for  leave  to  change  its  place  of  business  to  another 
place  in  the  same  county.  The  application  shall  state  the  reasons  for 
such  proposed  change,  and  shall  be  signed  and  acknowledged  by  a 
majority  of  its  board  of  directors  and  accompanied  by  the  written  assent 
thereto  of  at  least  two-thirds  of  its  shareholders.  If  the  proposed  place 
of  business  is  within  the  limits  of  the  village,  borough  or  city,  if  in  a 
city  not  divided  into  boroughs,  in  which  the  place  of  business  of  the  credit 
union  is  located,  such  change  may  be  made  upon  the  written  approval 
of  the  superintendent;  if  beyond  such  limits,  notice  of  intention  to  make 
such  application,  signed  by  two  principal  officers  of  the  credit  union  shall 
be  published  once  a  week  for  two  successive  weeks  immediately  preceding 
such  application  in  a  newspaper  published  in  the  city  of  Albany  in  which 
notices  by  state  officers  are  required  by  law  to  be  published,  and  in  a 
newspaper    to    be    designated    by   the    superintendent,    published    in    the 


74 

county  in  which  the  present  place  of  business  of  such  credit  union  is 
located.  If  the  superintendent  shall  grant  his  certificate  authorizing  the 
change  of  location,  as  provided  in  section  fifty  of  this  chapter,*  the 
credit  union  shall  cause  such  certificate  to  be  published  once  in  each 
week  for  two  successive  weeks  in  the  newspapers  in  which  the  notice 
of  application  was  published.  When  the  requirements  of  this  section 
shall  have  been  fully  complied  with,  the  credit  union  may,  upon  or  after 
the  day  specified  in  the  certificate,  remove  its  property  and  effects  to 
the  location  designated  therein,  and  thereafter  its  place  of  business  shall 
be  the  location  so  specified;  and  it  shall  have  all  the  rights  and  powers 
in  such  new  location   which  it  possessed  at  its  former  location. 

§  461.  Exemptions  and   individual   liability   of   shareholders. 

The  shares  of  members  of  any  credit  union  and  all  the  accumula- 
tions on  such  shares  shall  be  exempt  from  sale  on  execution  and  pro- 
ceedings supplementary  thereto  to  the  amount  of  six  hundred  dollars. 
The  transfer  of  such  shares  shall  not  be  taxable  under  the  provisions 
of  article  twelve  of  the  tax  law. 

Unless  the  by-laws  so  provide  the  shareholders  of  such  a  credit 
union  shall  not  be  individually  liable   for  the  payment  of  its   debts. 

§  462.  Reduction  of  liability  to  shareholders. 

Whenever  the  losses  of  any  such  credit  union  resulting  from  a 
depreciation  in  the  value  of  its  securities  or  otherwise  exceed  its  undi- 
vided profits  and  guaranty  fund,  so  that  the  estimated  value  of  its  assets 
is  less  than  the  total  amount  due  its  shareholders,  the  board  of  directors 
may,  with  the  written  approval  of  the  superintendent  of  banks,  order 
a  reduction  of  the  liability  to  each  of  its  shareholders,  so  as  to  divide 
the  loss  equitably  among  such  shareholders.  If  thereafter  the  credit 
union  shall  realize  from  such  assets  a  greater  amount  than  was  fixed 
in  the  order  of  reduction,  such  excess  shall  be  divided  among  the  share- 
holders whose  assets  were  reduced,  but  to  the  extent  of  such  reduction 
only. 


*  64).     Change    of    location;    approval   or    refusal;    certificate. 

Upon  receipt  by  the  superintendent  of  a  written  application  from  any  corporation 
or  private  or  individual  banker  or  personal  loan  broker  to  which  this  chapter  is 
applicable  for  leave  to  change  its  place  of  business  to  another  plac«  in  the  same 
county  and  within  the  limits  of  the  village,  borough  or  city,  if  in  a  city  not 
divided  into  boroughs,  in  which  its  principal  place  of  business  is  then  located, 
the  superintendent  shall,  if  he  shall  be  satisfied  that  there  is  no  reasonable  objec- 
tion to  such  change  of  location,  give  his  written  approval  of  the  proposed  change. 
If  the  proposed  place  of  business  is  without  such  limits,  the  superintendent  shall 
designate  for  the  publication  of  the  notice  of  intention  to  make  such  application  a 
newspaper  published  in  the  county  in  which  such  place  of  business  is  located. 
Upon  receipt  by  the  superintendent  of  evidence  satisfactory  to  him  of  due  publica- 
tion of  such  notice,  he  shall,  if  satisfied  that  there  is  no  reasonable  objection  to 
such  change  of  location,  make  a  certificate  in  triplicate  under  his  hand  and  official 
seal  authorizing  such  change  and  specifying  the  date  on  or  after  which,  and  the 
place  to  which  such  change  may  be  made,  and  shall  file  one  thereof  in  his  own 
office,  one  in  the  office  of  the  clerk  of  such  county,  and  shall  transmit  the  other 
to  such  applicant.  If  the  superintendent  shall  be  satisfied  in  any  case  that  such 
change  is  undesirable  or  inexpedient,  he  shall  refuse  such  application  and  notify 
such    corporation    or    banker    of    his    determination. 


75 

§  463.  Manner  of  withdrawal  and  expulsion  of  members;  effect  upon 
liabilities  to  credit  union. 

A  member  desiring  to  withdraw  from  a  credit  union  shall  file  a 
written  notice  of  his  intention  to  withdraw.  The  board  of  directors 
may  expel  any  member  who  has  not  carried  out  his  engagements  with 
the  credit  union,  or  who  has  been  convicted  of  a  criminal  offense,  or 
who  neglects  or  refuses  to  comply  with  the  provisions  of  this  article, 
or  of  the  by-laws,  or  who  habitually  neglects  to  pay  his  debts,  or  who 
becomes  insolvent  or  bankrupt.  The  members  at  any  regularly  called 
meeting  may  expel  any  member  whose  private  life  is!  a  source  of  scandal. 
But  no  member  shall  be  expelled  until  he  has  been  informed  in  writing 
of  the  charges  against  him  and  shall  have  had  reasonable  opportunity 
to  be  heard. 

Any  member  of  a  credit  union  who  withdraws  or  is  expelled  shall 
not  be  relieved  of  any  liability  to  the  corporation.  The  amounts  paid 
in  on  shares  or  deposited  by  such  members,  together  with  any  dividends 
credited  to  their  shares  and  any  interest  which  has  accrued  on  their  de- 
posits, shall  be  repaid  to  them  in  the  order  of  their  withdrawal  or  ex- 
pulsion, as  funds  become  available  therefor,  but  the  credit  union  may 
deduct  from  such  payments  any  sums  due  it  from  such  members. 

§  464.  Meetings  of  shareholders;  voting. 

At  all  meetings  of  shareholders  of  every  credit  union  each  share- 
holder shall  have  one  vote  irrespective  of  the  number  of  shares  which 
he  holds,  and  no  shareholder  may  vote  by  proxy.  At  any  annual  or 
special  meeting  a  decision  of  the  board  of  directors  may  be  overruled 
by  a  majority  vote  of  all  the  shareholders. 

1.  Annual  meeting.  An  annual  meeting  for  the  election  of  direc- 
tors, a  credit  committee  and  a  supervisory  committee  shall  be  held 
during  the  month  of  January  upon  such  notice  and  at  such  time  and 
place  as  the  by-laws  provide. 

2.  Special  meetings.  At  the  request  of  ten  members,  or  by  order 
of  the  directors  or  the  supervisory  committee,  special  meetings  may  be 
held,  after  notice  to  the  members   as  provided  in  the  by-laws. 

§  465.  Qualifications  and  disqualifications  of  directors. 

Every  director  of  a  credit  union  shall  be  a  shareholder  in  his  own 
right;  and  every  person  elected  to  be  a  director,  who,  after  such  election, 
shall  hypothecate,  pledge  or  cease  to  be  the  owner  in  his  own  right 
of  his  qualifying  share  shall  thereby  vacate  his  office,  and  shall  not  be 
eligible  for  re-election  as  a  director  for  a  period  of  one  year  from  the 
date  of  the  next  succeeding  annual  meeting. 

§  466.  Oaths  of  directors,  officers  and  members  of  committees. 

Each  director,  officer  and  member  of  committee  when  appointed  or 
elected,  shall  take  an  oath  that  he  will,  so  far  as  the  duty  devolves 
upon  him,  diligently  and  honestly  administer  the  affairs  of  the  credit 
union,  and  will  not  knowingly  violate,  or  willingly  permit  to  be  violated, 


7(i 

any  of  the  provisions  of  law  applicable  to  such  corporation,  and  that  he 
is  the  owner  in  good  faith  and  in  his  own  right,  of  at  least  one  share 
subscribed  for  by  him  or  standing  in  his  name  on  the  books  of  the 
credit  union  and  that  the  same  is  not  hypothecated,  or  in  any  way  pledged 
as  security  for  any  loan  or  debt,  and,  in  case  of  re-election,  that  such 
share  was  not  hypothecated,  or  in  any  way  pledged  as  security  for  any 
loan  or  debt  during  his  previous  term.  Such  oath  shall  be  subscribed  by 
the  directors,  officers  and  members  of  committees  making  it,  and  cer- 
tified by  an  officer  authorized  by  law  to  administer  oaths,  and  imme- 
diately transmitted  to  the   superintendent  of  banks. 

§  467.  Tenure  of  office  of  directors. 

The  directors,  unless  sooner  disqualified  or  removed,  shall  hold  office 
until  the  next  annual  meeting  of  shareholders  after  their  election  and 
until  their  successors  are  elected  and  have  qualified. 

§  468.  Powers  and  duties  of  directors;  not  entitled  to  compensation. 

The  board  of  directors  of  every  credit  union  shall  have  the  general 
management  of  the  affairs,  funds  and  records  of  the  corporation.  The 
directors  shall  hold  an  annual  meeting  within  ten  days  after  the  annual 
meeting  of  shareholders  for  the  purpose  of  electing  a  president,  vice- 
president,  secretary  and  treasurer  of  the  corporation. 

If  the  by-laws  so  provide  the  directors  may  elect  the  same  person 
as   secretary  and  treasurer. 

No  member  of  the  board  of  directors  shall  receive  any  compensa- 
tion for  his  services  as  a  member  of  said  board. 

Whenever  the  directors  shall  deem  any  loan  unsafe  they  may,  in 
their  discretion,  reqiure  additional  security  to  be  given  by  the  borrower, 
and  if  such  security  is  not  furnished  as  required  by  them,  they  may 
declare  the  loan  due  and  take  action  to  collect  the  same. 

§  469.  Special  duties   of  directors. 

Unless  the  by-laws  shall  expressly  reserve  any  or  all  of  the  fol- 
lowing duties  to  the  shareholders,  it  shall  be  the  special  duty  of  the 
directors : 

1.  To  act  upon  all  applications  for  membership  and  to  expel 
members. 

2.  To  fix  the  amount  of  surety  bond  required  of  each  officer  hav- 
ing the  control  or  custody  of  funds. 

3.  To  determine  from  time  to  time  the  rate  of  interest  which  shall 
be  allowed  on  deposits  and  charged  on  loans. 

4.  To  fix  the  maximum  number  of  shares  which  may  be  held  by, 
and  the  maximum  amount  which  may  be  lent  to  any  one  member. 

5.  To  declare  dividends. 

6.  To    recommend    amendments    to    the   by-laws. 

7.  To  fill  vacancies  in  the  board  of  directors  or  in  the  credit  com- 
mittee. 

8.  To  direct  the  deposit  or  investment  of  funds,  except  loans  to 
members,  and  to  perform  such  other  duties  as  the  by-laws  may  prescribe. 


77 

§  470.  Credit  committee;  duties. 

The  credit  committee  of  every  credit  union  shall  meet  as  often 
as  necessary,  after  due  notice  has  been  given  to  each  member,  for  the 
purpose  of  passing  upon  applications  of  members  for  loans  and  advances. 
Every  such  application  must  be  made  in  writing  and  must  state  the 
purpose  for  which  the  loan  is  desired  and  the  security  offered.  No  loan 
shall  be  made  unless  the  application  has  received  the  unanimous  approval 
of  the  members  of  the  committee  present  at  the  meeting,  provided  that  a 
majority  of  the  committee  shall  be  present. 

Any  applicant  for  a  loan  may  appeal  from  the  decision  of  the  credit 
committee  to  the  board  of  directors. 

In  no  case  shall  a  member  of  the  credit  committee  receive  any  com- 
pensation for  his  services  as  a  member  of  such  committee,  or  serve  as 
a   member   of   the   supervisory   committee. 

If  a  credit  union  is  located  elsewhere  than  in  a  city,  its  board  of 
directors  may,  if  the  by-laws  so  provide,  act  as  its  credit  committee. 

§  471.  Supervisory  committee;  powers  and  duties. 

The  supervisory  committee  shall  have  power: 

1.  To  suspend  at  any  time  by  unanimous  vote,  at  a  meeting  called 
for  that  purpose,  the  credit  committee  or  any  member  of  the  board 
of  directors  or  any  officer. 

2.  By  a  majority  vote  to  call  a  meeting  of  the  shareholders  to 
consider  any  violation  of  this  article  or  the  by-laws,  or  any  practices 
of  the  credit  union  which,  in  the  opinion  of  the  committee,  are  unsafe 
or   unauthorized. 

It  shall  be  the  duty  of  the  supervisory  committee: 

1.  To  inspect  the  securities,  cash  and  accounts  of  the  credit  union 
and  supervise  the  acts  of  its  board  of  directors,  officers  and  credit 
committee. 

2.  Within  seven  days  after  the  suspension  of  the  credit  committee, 
to  cause  notice  of  a  special  meeting  to  be  given  to  the  shareholders  to 
take  action  regarding  such  suspension  as  may  be  deemed  necessary. 

3.  To  fill  vacancies  in  the  supervisory  committee  until  the  next  annual 
meeting  of  the  shareholders. 

4.  At  the  close  of  each  fiscal  year  to  make  an  audit  of  the  books 
and  records  and  an  examination  of  the  business  and  affairs  of  the 
credit  union  for  the  year  and  to  make  a  full  report  of  its  assets  and 
liabilities,  receipts  and  disbursements  to  the  board  of  directors,  and  to 
cause  such  report  to  be  read  at  the  annual  meeting  of  shareholders  and 
filed  with  the  records  of  such  credit  union. 

In  no  case  shall  a  member  of  the  supervisory  committee  receive  any 
compensation  for  his  services  as  a  member  of  such  committee,  or  serve 
as   a  member  of  the   credit   committee, 

§  472.  Officers;  powers,  duties  and  compensation. 

The  powers,  duties  and  compensation  of  the  officers  of  any  credit 
union   shall  be   such   as   are   prescribed   in   the  by-laws. 


78 

§  473.  Amendment  of  by-laws;  approval  of  superintendent  of  banks. 

The  by-laws  of  a  credit  union  may  be  changed  or  amended  by  a 
three-fourths  vote  of  the  shareholders  present  at  any  meeting;  provided 
the  proposed  change  of  amendment  shall  have  first  had  the  approval 
of  the  superintendent  of  banks;  and  provided  further,  that  notice  of 
such  meeting,  containing  a  true  copy  of  the  proposed  change  or  amend- 
ment, shall  have  been  given  to  each  shareholder  as  prescribed  in  the 
by-laws.  A  copy  of  any  change  or  amendment  thus  adopted  shall  be 
filed  in  the  office  of  the  superintendent  of  banks  within  thirty  days  after 
its  adoption.  Any  credit  union  deeming  itself  aggrieved  by  the  refusal 
of  the  superintendent  of  banks  to  give  his  approval  to  a  proposed  change 
or  amendment,  may  apply  to  any  justice  of  the  supreme  court  of  the 
district  wherein  the  credit  union  is  located,  upon  notice  to  the  superin- 
tendent of  banks,  for  a  review  of  such  decision.  Such  justice  shall  re- 
view the  decision  of  the  superintendent  and  may  overrule  or  set  aside 
the  action  of  the  superintendent  and  approve  such  change  or  amendment. 
An  approval  thus  obtained  shall  enable  such  credit  union  to  make  the 
change   or  amendment  as   approved. 

§  474.  Credit  union  not  liable  for  taxation. 

Any  credit  union  subject  to  the  provisions  of  this  article  shall  be 
deemed  an  institution  for  savings  within  the  meaning  of  the  law  which 
exempts  such  institutions  from  taxation.  No  law  which  taxes  corpora- 
tions in  any  form,  or  the  shares  thereof  or  the  accumulations  therein, 
shall  apply  to  corporations  doing  business  in  accordance  with  the  pro- 
visions of  this  article,  unless  such  corporations  are  specifically  named 
in  said  law. 

§  475.  Fiscal  year. 

The  fiscal  year  of  every  credit  union  shall  end  at  the  close  of  busi- 
ness on  the  thirty-first  day  of  December. 

§  476.  Communications  from  banking  department  must  be  submitted 
to  directors  and  supervisory  committee,  and  noted  in  minutes. 

Each  official  communication  directed  by  the  superintendent  of  banks 
or  one  of  his  deputies  to  a  credit  union  or  to  any  officer  thereof,  relating 
to  an  investigation  or  examination  conducted  by  the  banking  depart- 
ment or  containing  suggestions  or  recommendations  as  to  the  conduct 
of  the  business  of  the  credit  union,  shall  be  submitted,  by  the  officer 
receiving  it,  to  the  board  of  directors  and  to  the  supervisory  committee 
at  the  next  meeting  of  such  board  or  committee  and  duly  noted  in  the 
minutes  of  the  meetings  of  such  board,  or  committee. 

§  477.  Reports  to  superintendent;  penalty  for  failure  to  make. 

On  or  before  the  first  day  of  February  in  each  year,  every  credit 
union  shall  make  a  written  report  to  the  superintendent  of  banks  which 
shall  contain  a  statement  of  its  condition  on  the  morning  of  the  first 
day  of  January  in  said  year  and  shall  be  in  the  form  and  contain  the 


79        '■...;:-\.S\''.;:\^\'\\t 

matters  prescribed  by  the  superintendent.  Every  such  report  shall  be 
verified  by  the  oaths  of  the  president,  treasurer,  secretary,  and  a  majority 
of  the  members  of  the  supervisory  committee.  The  verification  shall 
state  that  the  report  is  true  and  correct  in  all  respects  to  the  best  of 
the  knowledge  and  belief  of  the  persons  verifying  it,  and  that  the  usual 
business  of  the  credit  union  has  been  transacted  at  the  location  required 
by  this   article  and  not  elsewhere. 

Every  such  credit  union  shall  also  make  such  other  special  reports 
to  the  superintendents  as  he  may  from  time  to  time  require,  which  shall 
be  in  such  form  and  filed  at  such  date  as  may  be  prescribed  by  the 
superintendent  and  shall,  if  required  by  him,  be  verified  in  such  manner 
as  he  may  prescribe. 

If  any  such  credit  union  shall  fail  to  make  any  report  required  by 
this  section  on  or  before  the  day  designated  for  the  making  thereof,  or 
shall  fail  to  include  therein  any  matter  required  by  the  superintendent, 
such  credit  union  shall  forfeit  to  the  people  of  the  state  the  sum  of  five 
dollars  for  every  day  that  such  report  shall  be  delayed  or  withheld,  and 
for  every  day  that  it  shall  fail  to  report  any  such  omitted  matter,  unless 
the  time  therefor  shall  have  been  extended  by  the  superintendent  as 
provided  by  section   forty-nine  of  this  chapter.* 

§  478.  Penalty  for  loans  to  non-members;  recovery. 

Any  officer,  director  or  member  of  a  committee  of  a  credit  union 
who  knowingly  permits  a  loan  to  be  made  or  participates  in  a  loan  to 
a  non-member  of  the  corporation  shall  be  guilty  of  a  misdemeanor  and 
shall  be  primarily  liable  to  the  corporation  for  the  amount  thus  illegally 
loaned,  and  the  illegality  of  such  a  loan  shall  be  no  defense  in  any 
action  by  the  corporation  to  recover  the  amount  lent. 

§  479.  Penalty  for  use  of  term  "Credit  Union." 

The  use  by  any  person,  partnership,  association  or  corporation,  other 
than  those  authorized  as  provided  in  this  article,  of  any  name  or  title 
which  contains  the  two  words  "credit"  and  "union"  shall  be  a  misde- 
meanor. 


*  49.     Extensions   of   time   by   snperintendent. 

For  satisfactory  cause  to  him  shown,  the  superintendent  may  grant  extensions 
of  time  to  corporations  or  private  or  individual  bankers  or  personal  loan  brokers 
to   which  this   chapter   is   applicable,   as   follows: 

1.  He  may  extend  for  not  more  than  one  year  the  time  within  which  any 
such  corporation  may  commence  business.  Such  extension  shall  only  be  made  by 
an  order  under  his  hand  and  official  seal  which  shall  be  executed  in  triplicate 
and  one  copy  thereof  shall  be  filed  in  the  superintendent's  office,  one  in  the  office 
of  the  clerk  of  the  county  in  which  the  organization  certificate  of  such  corporation 
has   been    filed,    and   the    third    shall    be    transmitted    to    such    corporation. 

2.  He  may  extend  for  not  exceeding  ten  days  in  the  case  of  a  bank,  trust 
company,  private  banker  or  individual  banker,  and  for  not  exceeding  twenty  days 
in  the  case  of  any  other  corporation  to  which  this  chapter  is  applicable  or  of  a 
personal  loan  broker,  the  time  within  which  any  such  corporation,  banker  or  broker 
is   required    to   make   and   file   any    report    to    the   superintendent. 

3.  He  may  extend  for  such  period  as  he  may  deem  proper  the  time  within 
which  any  corporation  or  private  or  individual  banker  is  required  by  this  chapter 
to    dispose    of    real    estate    held    by    it. 


PUBLICATIONS 

DISTRIBUTED  BY  DIVISION  OF  REMEDIAL  LOANS 

RUSSELL  SAGE    FOUNDATION. 


RLl  The  Salary  Loan  Business  in  New  York  City,  1908.  By  Clarence 
W.  Wassam,  Ph.D.,  148  pp.  Report  prepared  under 
direction  of  Bureau  of  Social  Research  of  New  York  School 
of  Philanthropy.   Published  by  Russell  Sage  Foundation.* 

RL2  The  Chattel  Loan  Business.  1909.  By  A.  H.  Ham.  60  pp. 
Report  prepared  under  direction  of  Bureau  of  Social  Re- 
search of  New  York  School  of  Philanthropy.  Published 
by  Russell  Sage  Foundation.* 

RL3  Proceedings,  National  Federation  of  Remedial  Loan  Associations, 
Buffalo,  N.  Y.  June,  1909.  80  pp.  Published  by  National 
Federation   of   Remedial  Loan   Associations.* 

RL4  Proceedings,  National  Federation  of  Remedial  Loan  Associa- 
tions, St.  Louis,  Mo.  May,  1910.  60  pp.  Published  by 
National  Federation  of  Remedial  Loan  Associations.* 

RL5  Proceedings,  National  Federation  of  Remedial  Loan  Associa- 
tions, Boston,  Mass.  June,  1911.  100  pp.  Published  by 
National   Federation   of    Remedial   Loan   Associations.* 

RL6  Remedial  Loans  as  Factors  in  Family  Rehabilitation.  Jan., 
1912.  By  A.  H.  Ham.  8  pp.  Reprinted  from  Proceedings  of 
the  National  Conference  of  Charities  and  Correction,  Boston, 
1911,  by  Division  of  Remedial  Loans.* 

RL7  Remedial  Loans — A  Constructive  Program.  Jan.,  1912.  By 
A.  H.  Ham.  44  pp.  Reprinted  from  Proceedings  of  the 
Academy  of  Political  Science,  Jan.,  1912,  Vol.  11,  No.  2, 
by  Division  of  Remedial  Loans.* 

RL8  Campaign  against  the  Loan  Shark.  Jan.,  1912.  By  A.  H. 
Ham.    2  pp.     Published  by  Division  of  Remedial  Loans. 

RL9  Leaflet  on  Moving  Picture  Film,  "The  Usurer's  Grip." 
Oct.,  1912.  By  A.  H.  Ham.  Published  by  Division  of 
Remedial  Loans. 

RLIO  Bulletin  Vol.  I,  No.  1,  National  Federation  of  Remedial 
Loan  Associations,  July,  1912.  60  pp.  Published  by 
National  Federation  of  Remedial  Loan  Associations. 

RLll  Work  of  the  Remedial  Loan  Societies,  1911-1912.  July,  1912. 
(Statistical  Folder).  Published  by  National  Federation  of 
Remedial  Loan  Associations. 

RL12  Bulletin  Vol.  H,  No.  1,  National  Federation  of  Remedial  Loan 
Associations,  August,  1913.  104  pp.  Published  by  National 
Federation  of  Remedial  Loan  Associations. 

RL13  Work  of  the  Remedial  Loan  Societies,  1912-1913.  August,  1913. 
(Statistical  Folder).  Published  by  National  Federation  of 
Remedial   Loan   Associations. 

RL14  The  Loan  Shark  Campaign.  April,  1914.  By  Malcolm  W.  Davis. 
8  pp.  Reprinted  from  the  New  York  Evening  Po3t, 
April  10,   1914,   by  Division    of  Remedial  Loans. 

RL15  A  Credit  Union  Primer.  August,  1914.  By  A.  H.  Ham,  and  L.  G. 
Robinson.  88  pp.   Published  by  Division  of  Remedial  Loans. 

RL16  The  Cooperative  People's  Bank.  August,  1914.  By  M.  Alphonse 
Desjardins.  56  pp.  Published  by  Division  of  Remedial 
Loans. 


Out  of  print. 


GIFT 
NOV  19  1915 


RL  19 


CREDIT  UNIONS  AND  THEIR  RELATION 

TO  SAVINGS  AND  LOAN 

ASSOCIATIONS 


ARTHUR  H.  HAM 


/ 


Address  Delivered  before  the 

State  League  of  Savings  and  Loan  Associations, 

Port  Jervis,  N.  Y. 

June  10,  1915 


Division  of  Remedial  Loans 

Russell  Sage  Foundation 

130  East  22nd  Street,  New  York  City 


SOME  PUBLICATIONS  ON  COOPERATIVE  CREDIT 

ISSUED  BY 

RUSSELL  SAGE  FOUNDATION 

No.  5.  Cooperative  Credit.  A  Selected  Bibliography.  Bulle- 
tin of  Russell  Sage  Foundation  Library,  June, 
1914.     (5  cents.) 

RL  15.  A  Credit  Union  Primer.  By  Arthur  H.  Ham  and 
Leonard  G.  Robinson. 

Contains  a  brief  history  of  cooperative  credit,  a 
definition  of  its  field  in  the  United  States,  an  out- 
line of  the  elementary  principles  of  credit  unionism, 
together  with  model  by-laws,  necessary  books  and 
forms,  instructions  for  organizing,  and  the  New 
York  credit  union  law. 

Division  of  Remedial  Loans.  79  p.  1914.    (25  cents.) 

RL  16.  The  Cooperative  People's  Bank.  By  Alphonse  Des- 
jardins. 

The  evolution  of  the  cooperative  bank,  the  Canadian 

system,  its  growth  and  accomplishments. 
Division  of  Remedial  Loans.  42  p.  1914.  (15  cents.) 


CREDIT    UNIONS    AND    THEIR    RELATION    TO 
SAVINGS  AND  LOAN  ASSOCIATIONS 

The  credit  union  though  a  new  institution  in  this  state 
is  by  no  means  an  experiment.  It  is  merely  an  adaptation  of 
the  cooperative  machinery  for  encouraging  thrift  and  sup- 
plying short-term  personal  credit  that  has  been  in  successful 
operation  abroad  for  65  years.  Starting  in  Germany  in  1850 
it  has  spread  to  practically  every  European  country  and  even 
to  India,  Egypt  and  Japan,  taking  on  new  names  and  some- 
times new  characteristics  to  suit  the  conditions  existing  in 
each  country,  but  always  preserving  the  essential  elements 
which  have  made  it  successful  and  caused  it  to  be  termed  by 
students  "the  most  wonderful  thing  in  Europe." 

The  number  of  credit  unions  in  existence  in  all  parts  of 
the  world  has  been  estimated  to  be  over  65,000  with  a  mem- 
bership of  15,000,000  and  an  annual  business  amounting  to 
$7,000,000,000.  Russia  which  in  1904  had  378  unions  now 
has  14,000.  On  Jan.  1,  1914,  there  were  18,000  unions  in 
Germany  making  loans  to  members  in  one  year  of  over  a 
billion  and  a  half  dollars.  In  1909  Japan  alone  had  2,000 
unions,  and  the  little  country  of  Roumania  where  the  move- 
ment started  in  1902  had  2,500  unions  with  a  membership 
of  350,000  or  35%  of  the  entire  population  of  the  country. 

Despite  the  depredations  of  loan  sharks  in  our  cities  and 
the  apparent  hardships  encountered  by  farmers  in  some  sec- 
tions of  the  United  States  in  obtaining  short-term  credit  at 
reasonable  rates — conditions  which  led  to  the  origin  and 
growth  of  the  movement  abroad — there  was  in  that  year 
(1909)  not  a  single  credit  union,  rural  or  urban,  in  the  United 
States,  in  fact  there  is  no  more  striking  phenomenon  in  the 
history  of  modern  credit  than  the  remarkable  spread  and  re- 
sults of  cooperative  personal  credit  in  Europe  during  the  past 
two  decades  on  the  one  hand  and  its  failure  on  the  other  hand 
to  develop  in  this  country.  This  is  particularly  noteworthy 
when  we  consider  the  wonderful  development  of  the  building 
and  loan  idea  in  this  country,  for  the  building  and  loan  associa- 
tion (or  the  savings  and  loan  association  as  it  is  termed  in 


New  York)  is  to  the  credit  union  what  the  various  types  of 
associations  abroad  for  extending  long-term  mortgage  credit 
are  to  the  Schulze-Delitzsch  society  of  Germany,  the  People's 
Bank  of  Italy  and  the  other  variations  of  the  cooperative 
personal  credit  association  found  abroad.  One  might  have 
expected,  as  the  two  institutions  have  developed  simultane- 
ously abroad  to  meet  the  two  classes  of  demands,  that  some- 
thing similar  to  the  credit  union  would  have  arisen  here  to 
keep  pace  with  the  building  and  loan  association.  Surely  it 
was  not  through  lack  of  demand  for  increased  personal  credit 
facilities  that  the  credit  union  failed  to  develop  nor  was  it 
due  to  the  existence  of  other  machinery  capable  of  filling  the 
need.  In  his  palmiest  days  the  usurer  of  Europe  scarcely 
reached  the  pinnacle  of  extortion  which  for  many  years  he 
occupied  in  this  country  and  even  now  occupies  in  no  small 
number  of  communities.  As  a  matter  of  fact  the  worst  type 
of  usurer,  the  salary  loan  shark,  is  practically  an  American 
institution. 

While  witnessing  the  development  of  credit  unionism 
abroad  we  have  been  largely  content  in  the  past  to  enact  re- 
strictive legislation  which  made  the  plight  of  the  borrower 
worse  than  before.  A  long  chapter  of  wasted  efforts  has 
taught  us  that  legislation  affecting  small  loans  must  be  of  a 
constructive  character  if  it  is  to  accomplish  results  and  that 
along  with  legislation  must  go  competition  of  the  sort  that  will 
force  the  usurer  to  discontinue  his  evil  practices  and  adopt 
better  standards.  This  belief  has  lead  to  the  development 
in  recent  years  of  the  remedial  loan  society  which  aims  to 
supply  the  demand  for  small  loans  secured  by  mortgage  or 
pledge  of  personal  property  at  reasonable  interest  rates  and 
under  terms  which  borrowers  can  meet. 

The  growth  of  the  remedial  loan  societies  has  been  con- 
siderable, especially  during  the  last  six  or  seven  years,  and 
they  have  accomplished  a  measurable  improvement  in  the 
small  loan  situation,  but  their  field  is  necessarily  restricted. 
Their  most  ardent  adherents  realize  that  they  cannot  satisfy 
more  than  a  part  of  the  great  demand  for  short  term  loans 
and  that  on  account  of  their  impersonal  character  they  cannot 
effectively  encourage  borrowers  to  become  thrifty  and  pro- 
vide in  advance  for  such  emergencies  as  those  which  led  to 


their  distress.  This  is  the  nub  of  the  whole  proposition: 
the  need  for  (1)  an  agency  from  which  the  deserving  man, 
without  property,  may  borrow  small  amounts  for  a  legitimate 
purpose  at  a  reasonable  interest  rate  and  under  easy  terms 
of  repayment  on  security  of  his  character,  industry,  sobriety 
and  thrift,  and  (2)  an  agency  which  will  appeal  to  the  thrift 
instinct  in  a  much  more  personal  and  effective  way  than  is 
done  by  existing  agencies,  for  the  lack  of  thrift  is  at  the 
bottom  of  this  great  loan  shark  evil  which  has  caused  so  much 
despair  and  wrought  so  much  ruin  in  American  homes. 
/  What  is  thrift?  It  is  not  merely  saving  for  the  sake  of 
saving ;  it  is  economy,  self-reliance,  self-denial  to  attain  a  given 
object  which  may  be  anything  from  the  ownership  of  a  home 
to  the  accumulation  of  funds  to  buy  the  winter's  coal  supply. 
It  is  the  spirit  that  prompts  a  man,  realizing  that  he  has  a 
limited  term  of  usefulness,  to  set  aside  with  regularity,  over 
and  above  the  cost  of  proper  upkeep,  such  amounts  as  will 
provide  for  things  like  accident,  illness,  unemployment,  old 
age  and  death.  It  is  exactly  the  same  principle  that  the  com- 
petent manufacturer  employs  when  out  of  his  profits  he 
makes  necessary  provision  for  insurance  and  depreciation. 
We  all  realize  the  importance  of  making  provision  for  the 
future  but  too  many  of  us  expect  such  provision  to  come  from 
increased  earnings  in  the  future  rather  than  from  savings  in 
the  present.  And  as  our  condition  improves,  our  expenses  in- 
crease. As  our  income  grows,  new  wants  appear  and  saving 
is  again  put  off. 

Saving  is  difficult  for  the  average  man  no  matter  how 
good  his  intentions  may  be.  He  may  fully  appreciate  the  ad- 
vantages of  habits  of  thrift  but  to  make  him  thrifty  he  requires 
something  more  than  an  agency  that  will  receive  and  safeguard 
his  deposits :  he  requires  an  agency  which  will  make  its  hours 
of  business  conform  to  his  convenience,  which  is  conveniently 
located,  which  does  not  require  him  to  stand  in  line  for  an 
hour  awaiting  his  turn;  he  requires  an  agency  which  will 
constantly  remind  him  of  his  resolution  to  save  and  to  which 
he  is  not  ashamed  to  bring  a  dollar,  fifty  cents  or  even  a  dime. 

The  potentialities  of  the  credit  union  in  these  directions 
are  now  beginning  to  be  appreciated.  Following  the  imme- 
diate example  of  the  province  of  Quebec  and  the  advice  of 

5 


M.  Desjardins,  a  French-Canadian  journalist  who  has  given 
years  of  his  Hfe  to  the  founding  of  a  system  of  People's  Banks 
in  Canada,  the  State  of  Massachusetts  enacted  a  law  in  1909 
which  has  resulted  in  the  formation  of  over  50  unions  there 
with  a  membership  of  6,000  and  a  share  capital  of  $180,000. 
Nfew  York,  Texas,  Wisconsin,  North  Carolina,  Kansas  and 
some  other  states  have  now  followed  Massachusetts'  lead  and 
given  the  idea  legal  sanction.  In  New  York  17  credit  unions 
have  been  organized.  Eight  of  these  were  formed  by  Jewish 
farmers,  the  others  by  employes  of  such  establishments  as 
Bing  Sc  Bing,  Marx  &  RawoUe,  The  Postal  Telegraph  Com- 
pany and  the  American  Can  Company. 

A  credit  union  is  an  association  of  persons  joined  together 
in  a  cooperative  endeavor: 

1.  To  encourage  thrift  by  providing  a  safe,  convenient 
and  attractive  medium  for  the  investment  of  the  savings  of 
its  members; 

2.  To  promote  industry  and  eliminate  usury  and  extor- 
tion by  enabling  its  members  to  borrow  for  productive  and 
other  beneficial  purposes  at  a  reasonable  cost; 

3.  To  train  its  members  in  business  methods  and  self- 
government  and  educate  them  to  a  full  realization  of  the 
value  of  cooperation. 

Under  the  New  York  law  seven  or  more  persons  may 
combine  in  any  community  of  the  state,  rural  or  urban,  to 
form  a  credit  union  under  the  supervision  of  the  State  Bank- 
ing Department.  Within  certain  limits  the  law  permits  con- 
siderable variation  in  the  form  which  credit  unions  may  take. 
It  requires  that  the  by-laws,  which  must  first  be  approved 
by  the  Superintendent  of  Banks,  shall  state  the  scope  of  the 
organization ;  the  qualifications  for  membership ;  the  conditions 
upon  which  shares  may  be  issued,  paid  for,  transferred  and 
withdrawn;  the  conditions  upon  which  deposits  may  be  re- 
ceived and  withdrawn;  the  manner  in  which  the  funds  shall 
be  employed,  the  guaranty  fund  accumulated,  dividends  de- 
termined and  paid  and  fines  and  fees  of  any  character  charged. 
It  prescribes  a  maximum  rate  of  interest  upon  loans  of  one 
per  cent,  per  month ;  limits  the  borrowing  power  to  forty  per 
cent,  of  the  capital  except  where  the  capital  is  $5,000  or  less. 


in  which  event  a  credit  union  may  borrow  up  to  $2,000;  re- 
quires security  to  be  taken  for  loans  made  to  members  in 
excess  of  $50,  but  permits  endorsed  notes  to  be  considered 
security  for  such  loans,  and  limits  investments  to  securities 
legal  for  savings  banks. 

Membership  is  based  upon  some  common  bond  or  com- 
munity of  interest.  Common  occupation  or  employment, 
membership  in  the  same  church,  club,  fraternal  or  labor 
organization  and  neighborhood  association  are  recommended 
as  bases  of  membership.  In  rural  communities  the  church, 
parish,  school  district  and  the  local  grange  furnish  a  satis- 
factory foundation  for  membership.  The  scope  of  the  union 
must  be  so  limited  as  to  permit  of  mutual  acquaintanceship 
and  membership  must  also  be  based  upon  good  moral  char- 
acter, honesty,  sobriety  and  industry. 

A  credit  union  is  an  association  of  members  and  not  of 
capital.  For  that  reason  each  member  has  but  one  vote  re- 
gardless of  the  number  of  shares  that  he  may  hold.  Control 
is  vested  in  a  board  of  directors,  a  credit  committee  and  a 
supervisory  committee,  all  elected  by  the  members  at  a  general 
meeting.  The  directors  have  the  general  management  of  the 
affairs  of  the  credit  union.  It  is  their  duty  to  act  upon  appli- 
cations for  membership,  determine  the  rate  of  interest  on  loans 
and  deposits,  declare  dividends  and  recommend  amendments 
to  by-laws.  The  officers  usually  serve  without  pay.  Some- 
times the  treasurer  receives  nominal  compensation  in  return 
for  acting  as  manager  or  executive  clerk  of  the  union.  The 
credit  committee  has  charge  of  loans  made  to  members,  de- 
termines the  security  upon  which  each  loan  shall  be  made 
and  fixes  the  terms  of  its  repayment.  The  supervisory  com- 
mittee audits  the  books  and  accounts  and  supervises  the  acts 
of  the  directors,  officers  and  credit  committee. 

The  funds  of  the  credit  union  consist  of  share-capital, 
members'  deposits  and  borrowed  money.  Shares  are  usually 
issued  in  denominations  of  $5  payable  in  one  sum  or  in  in- 
stalments. Each  member  is  required  to  purchase  at  least  one 
share  before  he  may  become  a  depositor  or  borrower.  Divi- 
dends are  paid  only  upon  paid-up  shares  but,  regardless  of 
the  number  of  shares  for  which  a  member  may  have  subscribed, 
he  is  credited  with  a  paid-up  share  as  soon  as  his  instalment 

7 


payments  amount  to  the  par  value  of  a  single  share.  It  is 
customary  to  permit  withdrawals  in  the  order  of  their  filing, 
reserving  the  right,  however,  to  demand  the  usual  thirty 
days'  notice  in  writing. 

Payments  upon  shares  are  generally  looked  upon  as  sav- 
ings for  distant  expenditures,  while  deposits  are  savings  for 
more  imminent  needs.  It  is  customary  to  accept  even  trifling 
sums  of  money  on  deposit  or  as  instalments  upon  shares  in 
order  to  encourage  saving  among  the  humblest  members. 
Interest  is  allowed  on  deposits  at  or  slightly  above  the  sav- 
ings bank  rate. 

Loans  are  made  to  members  alone  and  solely  for  purposes 
which  promise  to  result  in  a  saving,  a  profit  or  other  benefit 
to  the  borrower.  The  character  of  the  member  is  largely  the 
security  for  the  loan.  Not  only  is  his  character  considered 
by  the  board  of  directors  when  acting  upon  his  application 
for  membership,  but  it  is  again  appraised  by  the  credit  com- 
mittee when  he  becomes  an  applicant  for  a  loan. 

Character  is  a  recognized  form  of  security.  Most  persons 
are  entitled  to  some  credit  upon  the  basis  of  their  character, 
but  the  ability  to  appraise  this  form  of  security  involves  a 
more  or  less  intimate  knowledge  of  personal  habits  and  of 
financial  and  domestic  situation.  Credit  unions  are  formed 
on  the  principle  that  a  man's  best  asset  is  his  own  associates' 
estimate  of  him.  As  they  are  composed  of  a  small  homoge- 
neous membership,  mutually  acquainted,  and  admit  to  mem- 
bership only  those  known  to  be  honest  and  industrious,  and 
make  loans  to  such  of  their  members  thus  carefully  selected 
as  have  a  legitimate  need  for  the  money,  their  loans  are 
comparatively  safe.  In  addition  to  these  safeguards,  the  loan 
if  of  considerable  size  is  further  secured  by  good  endorse- 
ments and  in  some  cases  even  by  the  pledge  or  mortgage 
of  personal  property  or  such  other  security  as  the  appHcant 
may  be  able  to  provide. 

The  credit  union  eliminates  the  high  cost  of  investigation 
to  which  commercial  agencies  operating  in  a  similar  field  are 
committed,  and  the  security  supplied  is  sufficient  to  attract 
savings  deposits  from  members  and  to  permit  a  certain  amount 
of  borrowing  when  necessary  on  favorable  terms  from  out- 
side sources  of  capital.     It  makes  loans  to  its  members  at  a 

8 


rate  of  interest  which  the  commercial  lending  agency  could 
never  approach.  Although  the  New  York  law  allows  an 
interest  rate  of  twelve  per  cent,  per  annum,  credit  unions  in- 
variably loan  at  a  much  lower  rate. 

The  credit  union  serves  the  individual.  It  understands 
him  better  than  anybody  else  and  makes  a  link  between  his 
need  for  credit  and  those  who  have  money  to  lend,  thus 
through  cooperation  bringing  credit  facilities  within  the 
reach  of  those  who  individually  could  not  obtain  them.  It 
has  been  said  that  the  credit  union  movement  is  teaching  us 
that  ten  times  nothing  is  something,  and  that  a  hundred  times 
nothing  may  be  $10,000,  for  if  a  hundred  men  without  bank- 
ing credit  unite  in  a  credit  union,  they  may  soon  have  as  a 
body  considerable  borrowing  power.  Capacity  for  united 
action  and  ability  to  join  in  sympathetic  association  are  the 
solution  of  the  difficulties  of  those  who  labor  under  credit 
handicaps. 

Membership  in  a  credit  union  carries  with  it  liability  for 
the  debts  of  the  union.  Each  credit  union  may  fix  the  liability 
of  its  members  in  proportion  to  their  share-holdings,  even 
prescribing  unlimited  liability  if  it  sees  fit. 

Membership  also  carries  with  it  responsibility.  A  mem- 
ber must  feel  the  necessity  for  the  organization,  that  he  is  a 
part  of  it,  that  it  is  developed  and  managed  to  promote  and 
protect  his  interests — a  real  financial  democracy  of  mutual 
assistance  and  mutual  confidence  in  which  each  member  is 
forced  to  make  of  his  own  efforts,  of  his  own  character,  of 
his  own  habits,  security  worth  lending  upon. 

A  question  which  is  naturally  asked  is,  "Are  deposits  safe 
in  these  institutions?"  Let  me  quote  briefly  from  the 
testimony  of  one  member*  of  the  American  Commission  which 
examined  the  European  associations:  "The  first  banks  we 
visited  I  asked  again  and  again:  'Suppose  I  have  $5,000  to 
deposit,  what  security  have  I?'  And  the  answer  was,  'The 
bank,  the  society.'  'Yes,  I  know;  but  your  bank  has  $400 
capital  and  $300  surplus;  now  what  security  is  that  for  my 
$5,000?'  and  the  answer  was  still,  'The  bank,  the  society.' 
And  it  dawned  on  me  that  I  had  missed  the  fundamental  prin- 
ciple of  the  system ;  that  I  was  looking  through  eyes  adjusted 

*Hon.   Ralph   Metcalf,  Washington. 

9 


to  our  commercial  banking;  that  the  $700  or  $800  of  capital 
and  surplus  really  cut  little  figure  in  the  equation ;  that  this  is 
the  security — the  principle  that  Raiffeisen  declared  and  has 
so  thoroughly  demonstrated — the  character,  moral  worth, 
sobriety,  industry,  thrift  of  the  50  or  100  men  united  in  co- 
operation; that  the  banks  are  safe  because,  as  Luzzatti  said, 
they  have  made  the  improvident  thrifty,  the  drunkard  sober, 
the  lazy  industrious;  that  their  loans  are  going  to  be  repaid 
because  they  build  character  as  well  as  bring  comfort,  because 
the  use  of  the  money  borrowed  is  in  each  case  its  own  security, 
and  nowhere  in  any  system  is  the  debtor  so  closely  and  con- 
stantly watched  and  kept  to  the  line.  Practically  all  of  the 
money  of  the  village  is  deposited  in  the  little  bank  with  full 
confidence.  Are  they  safe?  European  authorities  tell  you 
without  hesitation  that  they  cannot  fail." 

There  is  no  business  undertaking,  cooperative  or  other- 
wise, that  is  entirely  free  from  the  liability  of  loss.  What  few 
failures  have  occurred  among  credit  unions  have  been  due 
to  carelessness  and  neglect  of  the  basic  principles.  The 
official  reports  show  that  in  the  16  years  from  1895  to  1910 
there  were  but  19  failures  out  of  a  total  of  15,000  cooperative 
credit  societies  in  Germany,  and  in  no  single  case  did  a  de- 
positor lose  a  cent.  For  each  one  of  these  19  failures  there 
were  55  failures  among  commercial  banks.  Out  of  the  capital- 
ized character  of  groups  of  honest  and  industrious  persons  a 
security  has  come  which  has  proved  to  be  sound  in  spite  of 
the  weakness  of  the  individual  units.  It  may  be  said  that  it 
does  not  necessarily  follow  that  the  plan  will  work  in  the 
United  States,  but  why  should  it  not  work  here?  The  credit 
union  is  the  simplest  form  of  cooperation,  and  one  of  its 
strongest  features  is  its  remarkable  adaptability.  "It  has 
shaped  itself  to  varying  national  characteristics  and  to  every 
variety  of  man,  business  or  calling."  Can  it  be  that  we 
are  unfitted  to  take  advantage  of  this  idea?  The  tre- 
mendous growth  of  the  building  and  loan  associations,  of 
mutual  and  cooperative  banking  and  insurance,  and  the  suc- 
cess of  cooperative  ventures  in  production  and  distribution 
seem  to  answer  this  question  decisively  in  the  negative. 
Although  we  have  been  slow  to  grasp  the  idea  we  apparently 
now  have  the  beginnings  of  a  healthy  movement  tending  in 

10 


the  direction  of  the  widespread  organization  of  these  bene- 
ficent agencies  of  thrift  and  mutual  helpfulness. 

Credit  unions  do  not  become  competitors  of  the  savings 
and  loan  associations.  Though  both  seek  to  encourage  thrift, 
they  operate  in  different  fields.  Credit  unions  are  designed 
for  small  communities  or  groups  in  neighborhoods,  employ- 
ments or  fraternal,  religious  or  trade  associations  where  the 
members  are  personally  known  to  each  other.  The  savings 
and  loan  association  seeks  primarily  to  encourage  home  build- 
ing ;  the  credit  union  opens  up  a  new  field  of  thrift.  Operating 
usually  in  a  humbler  sphere  it  encourages  savings  in  small 
sums  on  the  part  of  people  who  perhaps  have  never  saved 
before,  but  who  through  the  agency  of  the  credit  union  may 
be  transferred  into  thrifty  citizens  aspiring  eventually  to  own 
their  own  homes. 

^  While  the  credit  union  resembles  the  saving  and  loan 
association  in  outline,  they  differ  in  numerous  important 
details.  Credit  union  shares  are  not  issued  in  series  but  may 
be  purchased  at  any  time,  instalment  payments  beginning 
from  the  date  of  subscription  and  being  fixed  in  size  and 
frequency  to  suit  each  member.  Payments  as  small  even  as 
five  cents  a  week  are  accepted  and  the  share  which  usually 
has  a  par  value  of  $5  matures  according  to  the  individual 
contract.  Dividends  may  be  credited  to  the  share  or  with- 
drawn at  the  member's  pleasure. 

As  voting  power  goes  with  membership  and  not  with  the 
number  of  shares  owned,  there  is  no  real  necessity  for  fixing 
a  maximum  number  of  shares  which  each  member  may  hold. 
There  is  no  loss  of  dividends  in  the  case  of  withdrawal. 
Irregular  savings  are  received  not  as  payments  on  savings 
shares  but  as  deposits  upon  which  a  fixed  rate  of  interest  is 
paid.  Twenty-five  per  cent,  of  the  net  earnings  is  set  aside 
annually  to  the  guaranty  fund  until  it  equals  the  capital. 

In  the  matter  of  loans  there  are  still  more  striking  dif- 
ferences between  the  two  institutions.  The  credit  union 
grants  short-term  personal  credit;  the  savings  and  loan  asso- 
ciation gives  long-term  credit  usually  upon  mortgage  security 
or,  if  not,  on  security  of  pledge  of  share  value,  the  character 
of  its  members  being  of  secondary  importance.  The  credit 
union  however  banks  upon  character.     As  any  member  may 

11 


become  an  applicant  for  a  loan  its  membership  is  on  a  more 
personal  basis. 

The  credit  union  considers  the  object  of  the  loan  to  be 
of  prime  importance  and  many  loans  otherwise  well  secured 
are  decHned  because  the  object  is  disapproved.  This  dis- 
couragement of  unnecessary  borrowing  is  one  of  the  credit 
union's  important  functions. 

Where  the  credit  union  has  developed,  it  has  offered  the 
readiest  escape  from  the  clutch  of  the  usurer ;  has  transformed 
borrowers  into  savers;  has  given  practice  in  careful  business 
administration  and  the  prompt  payment  of  obligations;  has 
taught  self-government  on  a  democratic  basis  and  developed 
a  community  spirit.  M.  Desjardins  says:  "It  transforms 
moral  qualities  into  valuable  assets  and  brings  to  the  indus- 
trious and  thrifty  man  a  higher  reward  than  mere  wages — 
the  confidence  of  his  fellow  citizens." 

The  savings  and  loan  associations  in  providing  oppor- 
tunity for  home  building  are  performing  a  function  of  prime 
importance.  The  benefit  derived  from  them  is  not  to  be 
measured  by  the  figures  representing  their  growth  and  success, 
surprising  as  they  are.  To  countless  men  the  assistance  of  the 
savings  and  loan  association  has  marked  the  beginning  of  days 
of  happiness,  prosperity  and  real  advancement  in  life. 
Cannot  you  as  representatives  of  these  beneficent  institutions 
aid  in  the  growth  of  this  newer  form  of  mutual  assistance 
represented  by  the  credit  union,  to  the  end  that  some  of  the 
thousands  now  toiling  to  pay  ruinous  interest  rates  to  heart- 
less loan  sharks  may  obtain  that  urgent  short-term  personal 
credit  which  means  so  much  to  the  man  in  need;  that  some 
of  those  in  humble  circumstances  whom  your  associations 
have  not  yet  reached  may  learn  the  practical  lesson  of  thrift 
from  small  beginnings  in  order  that  they  too  may  eventually 
get  into  the  class  of  self-respecting,  independent,  home-owning 
people? 


12 


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